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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 17, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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AMRESCO, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 59-1781257
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
700 NORTH PEARL STREET
SUITE 2400, LB 342
DALLAS, TEXAS 75201
(214) 953-7700
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
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L. KEITH BLACKWELL
VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
700 NORTH PEARL STREET
SUITE 2400, LB 342
DALLAS, TEXAS 75201
(214) 953-7700
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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COPY TO:
MICHAEL M. BOONE
HAYNES AND BOONE, LLP
3100 NATIONSBANK PLAZA
901 MAIN STREET
DALLAS, TEXAS 75202-3789
(214) 651-5000
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC:
From time to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION
OF SECURITIES TO BE REGISTERED REGISTERED SHARE (1) PRICE (1) FEE
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Common Stock, par value $0.05 per
share . . . . . . . . . . . . . . . . 1,590,947 shares $16.4375 $26,151,191.31 $7,924.60
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(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(c).
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED APRIL 17, 1997
PROSPECTUS
AMRESCO, INC.
1,590,947 SHARES OF COMMON STOCK
The shares of Common Stock, $0.05 par value per share (the "Common
Stock"), of AMRESCO, INC. (the "Company") covered by this Prospectus are shares
which may be offered and sold (the "Offering"), from time to time, by certain
shareholders of the Company (including trusts, limited partnerships or other
limited liability entities to which one or more current shareholders of the
Company may transfer all or some of their shares of Common Stock)
(collectively, the "Selling Shareholders"). See "Selling Shareholders." All of
the shares covered hereby will be sold only by the Selling Shareholders. This
Prospectus does not purport to cover the initial issuance by the Company of the
shares of Common Stock, but only the reoffer and resale of such shares by the
Selling Shareholders. The Company will not receive any of the proceeds from the
sale of the shares of Common Stock by the Selling Shareholders.
The Selling Shareholders may from time to time sell the shares of
Common Stock covered by this Prospectus to or through one or more underwriters,
and may also sell shares of Common Stock directly to other purchasers or
through agents, on the Nasdaq National Market in ordinary brokerage
transactions, in negotiated transactions, or otherwise, at market prices
prevailing at the time of sale, at prices related to the then prevailing market
price or at negotiated prices. See "Plan of Distribution."
The Company's Common Stock is traded on the Nasdaq National Market
under the symbol "AMMB."
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK
OFFERED HEREBY.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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The date of this Prospectus is ___________ ___, 1997
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR ANY OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT ITS DATE.
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TABLE OF CONTENTS
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Available Information.......................................................2
Incorporation of Certain Documents by Reference.............................3
Certain Definitions.........................................................4
The Company.................................................................5
Risk Factors................................................................7
Recent Developments........................................................10
Use of Proceeds............................................................11
Selling Shareholders.......................................................12
Description of Capital Stock...............................................15
Plan of Distribution.......................................................17
Legal Matters..............................................................18
Independent Accountants....................................................18
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). In accordance
with the Exchange Act, the Company files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission"). The
reports, proxy statements and other information can be inspected and copied at
the public reference facilities that the Commission maintains at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's regional
offices located at 7 World Trade Center, 13th Floor, New York, New York 10048,
and Suite 1400, 500 West Madison Street, Chicago, Illinois 60661. Copies of
these materials can be obtained at prescribed rates from the Public Reference
Section of the Commission at the principal offices of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549. Such documents may also be obtained at
the Web site maintained by the Commission (http://www.sec.gov). The Company's
Common Stock is quoted on the Nasdaq National Market and such reports, proxy
statements and other information may be inspected at the National Association
of Securities Dealers, Inc., 1735 K. Street N.W., Washington, D.C. 20006. The
Company's Senior Notes, Series 1996-A due 1999, its 10% Senior Subordinated
Notes due 2003 and its Senior Subordinated Notes, Series 1997-A due 2004 are
listed on the New York Stock Exchange. Reports and other information concerning
the Company can be inspected at the offices of such Exchange, 20 Broad Street,
New York, New York 10005.
The Company has filed with the Commission a registration statement on
Form S-3 (the "Registration Statement") under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to the Common Stock. This
Prospectus, which constitutes a part of the Registration Statement, does not
contain all the information set forth in the Registration Statement, certain
items of which
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are contained in schedules and exhibits to the Registration Statement as
permitted by the rules and regulations of the Commission. Statements made in
the Prospectus concerning the contents of any documents referred to herein are
not necessarily complete. With respect to each such document filed with the
Commission as an exhibit to the Registration Statement, reference is made to
the exhibit for a more complete description, and each such statement shall be
deemed qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by the Company with the
Commission pursuant to the Exchange Act, are hereby incorporated by reference
in this Prospectus: (i) Annual Report on Form 10-K for the year ended December
31, 1996, (ii) Current Report on Form 8-K dated February 20, 1997, (iii)
Current Report on Form 8-K dated March 6, 1997, (iv) Current Report on Form 8-K
dated March 12, 1997 and (v) Registration Statement on Form 8-A, as amended by
Form 8-A/A No. 1, dated November 7, 1996.
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus shall
be deemed to be incorporated by reference herein. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed superseded or modified for purposes of this Prospectus to the extent
that a statement contained herein (or in any other subsequently filed document
which also is incorporated by reference herein) modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, on the written or oral
request of any such person, a copy of any and all of the documents incorporated
by reference herein (other than exhibits to such documents which are not
specifically incorporated by reference in such documents). Written requests for
such copies should be directed to the Company, 700 North Pearl Street, Suite
2400, LB 342, Dallas, Texas 75201-7424, Attention: L. Keith Blackwell, Vice
President, General Counsel and Secretary. Telephone requests may be directed to
L. Keith Blackwell, Vice President, General Counsel and Secretary of the
Company, at (214) 953-7700.
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CERTAIN DEFINITIONS
The following are certain defined terms which may be used in this
Prospectus:
"ACC" means AMRESCO Capital Corporation, a subsidiary of the Company.
"AMRESCO SERVICES" means a division of AMRESCO Management, Inc., a
subsidiary of the Company.
"ASSET PORTFOLIO" means a pool or portfolio of performing,
nonperforming or underperforming commercial, industrial, agricultural and/or
real estate loans.
"CLC" means Commercial Lending Corporation, a Nevada corporation.
"CLC ACQUISITION" means the Company's purchase of all of the
outstanding capital stock of CLC and of certain assets of CLC IO, a sister
company of CLC.
"CLC IO" means CLC IO, Inc., a Nevada corporation.
"COMPANY" means, unless otherwise stated in this Prospectus or unless
the context otherwise requires, the Company and each of its subsidiaries.
"CONDUIT PURCHASERS" means investment bankers and other financial
intermediaries who purchase or otherwise accumulate pools or portfolios of
loans having common features (e.g., real estate mortgages, etc.), with the
intent of securitizing such loan assets and selling them to a trust that
obtains its funds by selling undivided interests in the revenue streams
generated by the loans to public or private investors.
"CONVERTIBLE SUBORDINATED DEBENTURES" means the Company's 8%
Convertible Subordinated Debentures due 2005.
"DUS" means the Delegated Underwriting and Servicing program
established by Fannie Mae that permits a DUS approved lender to commit and
close loans for multifamily mortgages for resale to Fannie Mae without Fannie
Mae's prior approval of such loans.
"FACE VALUE" means, with respect to any loan or Asset Portfolio, the
aggregate unpaid principal balance of a loan or loans.
"FANNIE MAE" means the Federal National Mortgage Association.
"FREDDIE MAC" means the Federal Home Loan Mortgage Corporation.
"FULL SERVICER" means an entity which serves as Primary Servicer,
Master Servicer and Special Servicer on an Asset Portfolio.
"HOLLIDAY FENOGLIO" means Holliday Fenoglio, Inc., a subsidiary of the
Company.
"MASTER SERVICER" means an entity which provides administrative
services with respect to securitized pools of mortgage-backed securities.
"PREFERRED STOCK" means the Company's preferred stock, par value $1.00
per share.
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"PRIMARY SERVICER" means an entity which provides various
administrative services with respect to loans such as collecting monthly
mortgage payments, maintaining escrow accounts for the payment of ad valorem
taxes and insurance premiums on behalf of borrowers, remitting payments of
principal and interest promptly to investors in mortgages or the Master
Servicer of a pool and reporting to those investors or the Master Servicer on
financial transactions related to such mortgages.
"QUALITY" means Quality Mortgage USA, Inc., a California corporation.
"QUALITY ACQUISITION" means the Company's purchase of substantially
all the operating assets, and the assumption of certain liabilities, of Quality
Mortgage USA, Inc.
"QUALITY PURCHASE AGREEMENT" means that certain agreement dated
October 9, 1996 by and among ARMC and Quality, Calmac Funding, Russell and
Rebecca Jedinak, DLJ Mortgage Capital, Inc., and DLJ Quality Partners, L.P.
"REVOLVING LOAN AGREEMENT" means the Second Amended and Restated Loan
Agreement dated as of February 7, 1997 and as subsequently amended, among the
Company, NationsBank of Texas, as Agent, and the lenders which are parties
thereto from time to time.
"RULE 144" means Rule 144 promulgated under the Securities Act.
"SECURITIZATION" and "SECURITIZED" mean a transaction in which loans
originated or purchased by an entity are sold to special purpose entities
organized for the purpose of issuing asset-backed securities.
"SENIOR NOTES" means the Company's Senior Notes, Series 1996-A due
1999.
"SENIOR SUBORDINATED NOTES DUE 2003" means the Company's 10% Senior
Subordinated Notes due 2003.
"SENIOR SUBORDINATED NOTES DUE 2004" means the Company's Senior
Subordinated Notes, Series 1997-A due 2004.
"SPECIAL SERVICER" means an entity which provides asset management and
resolution services with respect to nonperforming or underperforming loans
within a pool of performing loans and/or mortgages.
"SUBORDINATED CERTIFICATES" means the unrated and uninsured tranches
of collateralized residential or commercial mortgage-backed securities.
"SUB-PRIME LOAN" means a residential mortgage loan to borrowers who do
not qualify for conventional loans or whose borrowing needs are not met by
traditional residential mortgage lenders. Such borrowers may not satisfy the
more rigid underwriting standards of the traditional residential mortgage
lending market for a number of reasons, such as blemished credit histories
(from past loan delinquencies or bankruptcy), inability to provide income
verification data or lack of established credit history.
"WAREHOUSE" means a type of lending arrangement whereby loans funded
or purchased and held for sale are financed by financial institutions or
institutional lenders on a short-term basis and secured by the underlying
loans.
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THE COMPANY
The Company is a leading specialty financial services company engaged
in residential mortgage banking, commercial mortgage banking, asset management,
institutional real estate investment advisory services and commercial finance.
The residential mortgage banking business involves originating, acquiring,
warehousing and securitizing Sub-prime loans. The commercial mortgage banking
business involves the origination, underwriting, placement, sale,
securitization and servicing of commercial real estate mortgages. The asset
management business involves acquiring at a discount to Face Value and managing
and resolving Asset Portfolios to maximize cash recoveries. The Company manages
and resolves Asset Portfolios acquired by the Company alone, acquired by the
Company with co-investors and owned by third parties. The Company's
institutional real estate investment advisory subsidiary provides real estate
investment advice to various institutional investors (primarily pension funds).
The commercial finance business involves providing high yield debt financing
for businesses and projects which are unable to access traditional lending
sources and providing construction loans for builders of single family
residences.
BUSINESS STRATEGY
The Company's original business of managing and resolving Asset
Portfolios for third parties developed as a result of the takeover of failed
thrifts and banks by the federal government's deposit insurance agencies in the
late 1980s. In 1994, the Company implemented a growth strategy to expand its
business lines and to leverage upon business opportunities in those specialty
finance markets that capitalize on the Company's competitive strengths and
reputation. The key elements of the Company's business strategy now include:
o growing its participation in the origination, acquisition and
securitization of Sub-prime loans;
o expanding its presence in the commercial mortgage banking
market through greater market penetration and by increasing
its participation in the market for securitization of
commercial mortgages;
o investing for its own account in Asset Portfolios and
continuing to provide high quality management and resolution
services to co-investors and other third-party owners of
Asset Portfolios;
o expanding its institutional real estate investment advisory
business to complement the Company's existing business lines;
and
o developing and acquiring additional businesses which
complement the Company's existing core capabilities in
specialty financial services.
The Company will continue to identify, develop and market specialized
financial products that combine and leverage upon the various complementary
skills existing within the Company's business groups as well as expand its
crossmarketing of products and services among its business lines.
RESIDENTIAL MORTGAGE BANKING
General. The Company originates, acquires, warehouses and securitizes
Sub-prime loans. Borrowers under such loans may not satisfy the more rigid
underwriting standards of the traditional residential mortgage lending market
for a number of reasons, such as blemished credit histories (from past loan
delinquencies or bankruptcy), inability to provide income verification data or
lack of established credit history. The Company believes that this market is
large and is underserved by traditional lenders. Therefore, there is less
competition in this market and interest rates are higher than on mortgage loans
for more creditworthy borrowers. The Company believes that the higher
interest rates offered
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by the Sub-prime loan market are attractive even after taking into
account the potentially greater credit risk associated with such borrowers.
Loan Sources. The Company both originates loans and acquires loan
portfolios from third-party originators. The Company originates Sub-prime loans
through a nationwide network of approximately 50 offices in 32 states. These
offices enable the Company to maintain local relationships with over 4,500
Company-approved mortgage brokers. The Company also acquires portfolios of and
individual Sub-prime loans from third-party loan originators. The Sub-prime
loans originated and purchased by the Company are then warehoused by the
Company for securitization.
Securitization. Loan originations and acquisitions are funded through
warehouse credit facilities arranged by the Company until the Company
accumulates loans of an aggregate principal amount sufficient to permit
efficient securitization of the loan pool (generally, in excess of $250.0
million). The loans are then conveyed to a special purpose trust that sells
into the secondary market various tranches of rated collateralized
mortgage-backed securities representing undivided interests in the revenue
streams generated by the loans. Subordinated Certificates issued by the trust
are purchased by the Company. The Company either retains these Subordinated
Certificates or pools and sells them in private sales. The Company also
acquires Subordinated Certificates from Sub-prime, jumbo and non-standard
residential mortgage securitizations organized by third parties. The Company
does not currently service any residential loans it originates or acquires. The
mortgage-backed securities publicly sold to date by the Company have been rated
"AAA" by Standard & Poor's and "Aaa" by Moody's Investors Service, Inc. To
achieve these ratings the Company has used a combination of
over-collateralization techniques and financial guaranty insurance.
COMMERCIAL MORTGAGE BANKING
General. The Company performs a wide range of commercial mortgage
banking services, including originating, underwriting, placing, selling and
servicing commercial real estate loans through Holliday Fenoglio, ACC and
AMRESCO Services.
Commercial Mortgage Banking Business. Holliday Fenoglio primarily
serves commercial real estate developers and owners by originating commercial
real estate loans and acting as a broker on commercial real estate sales
through its own commission-based mortgage bankers in its offices located in
Atlanta, Boca Raton, Buffalo, Dallas, Houston, New York City, Orange County
(California), Orlando, Portland (Oregon) and San Diego. The loans originated by
Holliday Fenoglio generally are funded by institutional lenders, principally
insurance companies, and by Conduit Purchasers. The Company believes that
Holliday Fenoglio's relationship and credibility with its institutional lender
network provide the Company with a competitive advantage in the commercial
mortgage banking industry.
ACC is a mortgage banker that originates and underwrites commercial
real estate loans that are funded primarily by Conduit Purchasers and Fannie
Mae. Unlike Holliday Fenoglio, ACC makes certain representations and warranties
concerning the loans it originates. These representations cover title to the
property, lien priority, environmental reviews and certain other matters. ACC
targets mortgage loans for commercial real estate properties suitable for sale
to Conduit Purchasers that accumulate loans for securitization programs. ACC
serves its market directly through ACC's offices located in Dallas, Miami,
Washington, D.C. and Winston-Salem, as well as through a network of
approximately 40 independent mortgage brokers located throughout the United
States. ACC has established a financing and advisory relationship with a major
Wall Street investment bank whereby ACC originates commercial mortgages, which
are funded and securitized by a partnership through which ACC shares in the
accumulation and securitization profits and risks. ACC is approved by Fannie
Mae to participate in its DUS program, which ACC believes makes it a more
competitive loan originator and underwriter of multifamily mortgages. ACC is
also an approved lender in the Freddie Mac multifamily sales/servicer program
in the states of Florida, North Carolina and South Carolina.
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Commercial Loan Servicing Business. The Company serves as a Primary
Servicer for whole loans and as a Master/Full Servicer for securitized pools of
commercial mortgages through AMRESCO Services. The dominant users of commercial
loan servicers are commercial mortgage-backed bond trusts and similar
securitized commercial asset-backed loan portfolios held by numerous passive
investors. The revenue stream from servicing contracts on commercial mortgages
is relatively predictable as prepayment penalties in commercial mortgages
discourage early loan payoffs, a risk that is more significant to servicers of
residential mortgage portfolios.
ASSET MANAGEMENT
General. The Company manages and resolves Asset Portfolios acquired at
a discount to Face Value by the Company alone and by the Company with
co-investors. The Company also manages and resolves Asset Portfolios owned by
third parties. Asset Portfolios generally include secured loans of varying
qualities and collateral types. The majority of the loans in the Asset
Portfolios in which the Company invests are in payment default at the time of
acquisition. Asset Portfolios purchased by the Company are currently comprised
primarily of collateralized business loans, the resolution of which may be
based either on cash flow of a business or on real estate and other collateral
securing the loan. While the majority of the Asset Portfolios managed or owned
by the Company are located in the United States, the Company has opened offices
in Toronto and London through which it pursues Asset Portfolio acquisition
opportunities and manages its investments in Canada and Western Europe. The
Company may open other offices and seek strategic alliances in other
international markets.
Asset Portfolio Investment. The Company invests in Asset Portfolios by
purchasing them alone or with co-investors. The Face Values of Asset Portfolios
acquired solely by the Company have ranged between approximately $0.5 million
and approximately $96.8 million, whereas Asset Portfolios owned by it with
co-investors have ranged up to approximately $426.8 million, with investments
by the Company ranging from approximately $0.1 million to $17.6 million. The
Company generally funds its share of any investment with a combination of
borrowings under its existing credit lines and internal cash flow.
Third Party Asset Management and Resolution Services. The Company acts
as a Special Servicer to third parties pursuant to contracts with owners of
Asset Portfolios (including partnerships, joint ventures and other groups in
which the Company is a co-investor). Management of Asset Portfolios includes
developing loan resolution strategies and resolving loans, overseeing and
managing collateral condition and performance, and providing routine accounting
services. Servicing contracts provide incentives for the Company to resolve
Asset Portfolios in order to maximize returns to third party owners.
INSTITUTIONAL REAL ESTATE INVESTMENT ADVISORY
The Company provides real estate investment advice to various
institutional investors (primarily pension funds) seeking to invest a portion
of their funds in real estate and related investments. Although the Company is
paid acquisition and disposition fees by some of its clients, its principal
form of revenue from this activity is asset management fees, which are based on
the cash flow of the investments under management or are negotiated at the time
of the client's investment in a property.
The Company is marketing to institutional investors the opportunity to
invest in Subordinated Certificates issued in commercial and residential
mortgage securitizations through investment funds being organized by the
Company. The Company believes that because of its experience in evaluating and
underwriting higher risk loans, it can take advantage of investment
opportunities that are presented by such Subordinated Certificates. The Company
expects that a majority of its investments in Subordinated Certificates in the
future will be through these funds. As a policy, the Company will not sell to
these funds Subordinated Certificates created in securitizations organized by
the Company.
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COMMERCIAL FINANCE
The Company's commercial finance business was formally commenced in
1996 and has not contributed materially to the Company's revenues or net income
to date. However, the Company intends to expand its commercial finance business
through acquisitions of targeted niche finance companies and internal
start-ups. On March 31, 1997, the Company purchased CLC, an originator,
securitizer and servicer of franchise and commercial mortgage loans. See
"Recent Developments." The Company's commercial finance business currently
involves: (i) providing high yield debt financing for businesses and projects
which are unable to access traditional lending sources and (ii) providing
construction financing for builders of single family residences.
See the information under the caption "Business" in the Annual Report
on Form 10-K for the year ended December 31, 1996, for a more complete
description of the Company's business.
The Company is a Delaware corporation. The Company's principal
executive offices are located at and its mailing address is 700 North Pearl
Street, Suite 2400, Dallas, Texas 75201-7424 and its telephone number at that
address is (214) 953-7700.
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RISK FACTORS
Investors should carefully consider the following matters in
connection with an investment in the Common Stock, in addition to the other
information contained or incorporated by reference in this Prospectus.
Information contained or incorporated by reference in this Prospectus may
contain "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995, which can be identified by the use of
forward-looking terminology such as "may," "will," "expect," "anticipate,"
"estimate" or "continue" or the negative thereof or other variations thereon or
comparable terminology. The following matters and certain other factors noted
throughout this Prospectus, as well as any exhibits to the Registration
Statement of which this Prospectus is a part, constitute cautionary statements
identifying important factors with respect to any such forward-looking
statements, including certain risks and uncertainties that could cause actual
results to differ materially from those reflected in such forward-looking
statements.
CHANGE IN BUSINESS MIX AND MANAGEMENT OF GROWTH
In early 1994, the Company made the strategic decision to diversify
its business lines. The Company has entered the residential mortgage banking,
commercial mortgage banking, institutional real estate investment advisory and
commercial finance businesses through a combination of acquisitions and the
internal startup of new business lines, as well as increased its investments in
Asset Portfolios. These businesses contributed a substantial portion of the
Company's revenue and operating income in 1995, and the Company expects they
will continue to contribute a substantial portion of its revenue and operating
income for the foreseeable future. The rapid entry of the Company into these
business lines has resulted in increased demands on the Company's personnel and
systems. As part of its business strategy, the Company intends to acquire
additional businesses which complement the Company's core capabilities in
specialty financial services. The Company must successfully continue its
assimilation of multiple acquired businesses with differing markets, customer
bases, financial products, systems and managements. The Company's ability to
support, manage and control continued growth is dependent upon, among other
things, its ability to hire, train, supervise and manage its workforce and to
continue to develop the skills necessary for the Company to compete
successfully in its new business lines. There can be no assurance that the
Company will successfully meet all of these challenges.
On October 25, 1996, the Company consummated the Quality Purchase
Agreement pursuant to which the Company acquired substantially all the
operating assets of Quality and thereby entered the Sub-prime loan origination
business. In addition to the risks associated with diversifying into new
business lines described above, the Quality Acquisition presents several other
specific risks. Quality has experienced declining loan volumes, a high rate of
employee turnover, including high level management, and increased competition.
The Company must stabilize Quality's work force, strengthen Quality's senior
and middle management, upgrade Quality's information and data processing
systems and successfully integrate a nationwide Sub-prime loan origination
business with its existing business lines. There can be no assurance that the
Company will be successful in all of these efforts.
NEED FOR ADDITIONAL FINANCING
General. The Company's ability to execute its business strategy
depends to a significant degree on its ability to obtain additional
indebtedness and equity capital. The Company has no commitments for borrowings
or sales of equity capital and there can be no assurance that the Company will
be successful in consummating any such future financing transactions on terms
satisfactory to the Company, if at all. Factors which could affect the
Company's access to the capital markets, or the costs of such capital, include
changes in interest rates, general economic conditions and the perception in
the capital markets of the Company's business, results of operations, leverage,
financial condition and business prospects. Each of these factors is to a large
extent subject to economic, financial, competitive and other factors beyond the
Company's control. In addition, covenants under the Company's current
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and future debt securities and credit facilities may significantly restrict the
Company's ability to incur additional indebtedness and to issue Preferred
Stock. The Company's ability to repay its outstanding indebtedness at maturity
may depend on its ability to refinance such indebtedness, which could be
adversely affected if the Company does not have access to the capital markets
for the sale of additional debt or equity securities through public offerings
or private placements on terms reasonably satisfactory to the Company.
Dependence on Warehouse Financing. The Company's commercial and
residential mortgage securitization businesses depend upon warehouse facilities
with financial institutions or institutional lenders to finance the Company's
purchase of loans on a short-term basis pending sale or securitization.
Implementation of the Company's growth strategy requires continued availability
of warehouse facilities and may require increases in the capacity of warehouse
facilities. There can be no assurance that such financing will be available on
terms reasonably satisfactory to the Company. The inability of the Company to
arrange additional warehouse facilities or to extend or replace existing
facilities when they expire would have a material adverse effect on the
Company's business, financial condition and results of operations and on the
Company's outstanding securities.
RISKS OF SECURITIZATION
Significance of Securitization. The Company currently believes that it
will become increasingly dependent upon its ability to securitize mortgage
loans by pooling and subsequently selling them in the secondary market in order
to generate revenues, earnings and cash flows. Accordingly, adverse changes in
the secondary mortgage market could impair the Company's ability to originate,
purchase and sell mortgage loans on a favorable or timely basis. Any such
impairment could have a material adverse effect upon the Company's business and
results of operations. The Company endeavors to effect public securitizations
of its loans on at least a quarterly basis. However, market and other
considerations, including the conformity of loans to insurance company and
rating agency requirements, could affect the timing of such transactions. Any
delay in the sale of loans beyond a quarter end would delay any expected gain
on sale beyond the given quarter and adversely affect the Company's reported
earnings for such quarter.
Impact of Gains on Sale. The Company entered the residential mortgage
banking business in 1995, and since that time an increasing portion of its
revenues have been attributable to non-cash gains on sale. If the Company
continues to increase its reliance on securitizations, non-cash gains on sale
may continue to increase as a percentage of total revenues.
Importance of Credit Enhancement. In order to optimize access to the
secondary market for residential mortgage-backed securities, the Company may
rely on monoline insurance companies to provide, in exchange for premiums, a
guarantee on outstanding senior interests in the related securitization trusts
to enable it to obtain a "AAA/Aaa" rating for such interests. Any unwillingness
of monoline insurance companies to guarantee the senior interests in the
Company's loan pools could have a material adverse effect on the Company's
financial position, expected gain on sale and results of operations.
Retained Risks of Securitized Loans. The Company makes various
representations with respect to the loans that it pools and securitizes. The
Company's representations rely in part on similar representations made by the
originators of such loans when they were purchased by the Company. Accordingly,
the Company has a claim against the originator in the event of a breach of any
of these representations made by the originators. However, the Company's
ability to recover on any such claim is dependent on the financial condition of
the originator. There can be no assurance that the Company will not experience
a material loss in respect of any of these contingencies.
Investment in Subordinated Certificates. The Company derives a
significant portion of its reported income from its investment in Subordinated
Certificates created in securitizations completed
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by the Company. The earnings on such Subordinated Certificates represent the
excess of the interest and principal paid by a borrower on a loan over the
interest and principal passed through to the investor acquiring an interest in
such loan, less the normal servicing and other fees and credit losses realized.
When such loans are pooled, the Company recognizes as a gain the estimated fair
value of the Subordinated Certificates, net of the Company's upfront costs of
purchasing and securitizing the underlying loans. The estimated fair value of
the Subordinated Certificates is computed using prepayment, default and
interest rate assumptions that the Company believes market participants would
use for similar instruments at the time of sale. Accordingly, no assurance can
be given that these securities could in fact be sold or recovered at their
stated values on the balance sheet, if at all.
Contingent Risks. Although the Company sells substantially all the
mortgage loans which it originates or purchases, the Company retains some
degree of credit risk on substantially all loans sold. During the period of
time that loans are held pending sale, the Company is subject to the various
business risks associated with the lending business including the risk of
borrower default, the risk of foreclosure and the risk that a rapid increase in
interest rates would result in a decline in the value of loans to potential
purchasers. The documents governing the Company's securitization program
require the Company to establish deposit accounts or build
over-collateralization levels through retention of distributions otherwise
payable to the holders of the Subordinated Certificates. Such amounts serve as
credit enhancement for the related trust and are therefore available to fund
losses realized on loans held by such trust. In addition, documents governing
the Company's securitization program require the Company to commit to
repurchase or replace loans which do not conform to the representations and
warranties made by the Company at the time of sale.
RISKS RELATED TO SUB-PRIME LOANS
The Sub-prime loan market is comprised of credit-impaired borrowers
who generally have significant equity in their homes and whose borrowing needs
are not currently met by traditional financial institutions. Loans made to such
borrowers may entail a higher risk of delinquency and higher losses than loans
made to more creditworthy borrowers. While the Company believes that the
underwriting criteria and collection methods it employs enable it to reduce the
higher risks inherent in loans made to credit-impaired borrowers, no assurance
can be given that such criteria or methods will afford adequate protection
against higher delinquencies, foreclosures or losses than anticipated and, as a
result, the Company's financial condition or results of operation could be
adversely affected.
CYCLICALITY OF AND COMPETITION IN THE ASSET MANAGEMENT BUSINESS
The asset management business is affected by long-term cycles in the
general economy. In addition, the volume of domestic Asset Portfolios available
for purchase by investors or management by third party servicers such as the
Company has generally declined since 1993. The Company cannot predict what will
be a normal annual volume of Asset Portfolios to be sold or outsourced for
management and resolution. Moreover, future Asset Portfolio purchases will
depend on the availability of Asset Portfolios offered for sale, the
availability of capital and the Company's ability to submit successful bids to
purchase Asset Portfolios. The acquisition of Asset Portfolios has become
highly competitive in the United States. This may require the Company to
acquire Asset Portfolios at higher prices thereby lowering profit margins on
the resolutions of such Asset Portfolios. Under certain circumstances the
Company may choose not to bid for Asset Portfolios which it believes cannot be
acquired at attractive prices. As a result of all the above factors, Asset
Portfolio purchases may vary significantly from quarter to quarter.
GENERAL ECONOMIC CONDITIONS
Periods of economic slowdown or recession, rising interest rates or
declining demand for real estate may adversely affect certain segments of the
Company's business. Although such economic conditions may increase the number
of nonperforming loans available for sale to or for management
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by the Company, such conditions could adversely affect the resolution of Asset
Portfolios held by the Company for its own account or managed for others, lead
to a decline in prices or demand for collateral underlying Asset Portfolios or,
in the case of Asset Portfolios held for the Company's own account, increase
the cost of capital invested by the Company and the length of time that capital
is invested in a particular Asset Portfolio, thereby negatively impacting the
rate of return realized from such Asset Portfolio. Economic downturns and
rising interest rates also may reduce the number of loan originations by the
Company's commercial mortgage banking business and negatively impact its
commercial and residential mortgage securitization activity.
In addition, periods of economic slowdown or recession, whether
general, regional or industry-related, may increase the risk of default on
residential mortgage loans and may have an adverse effect on the Company's
business, financial condition and results of operations. Such periods also may
be accompanied by decreased consumer demand for residential mortgages,
resulting in declining values of homes securing outstanding loans, thereby
weakening collateral coverage and increasing the possibility of losses in the
event of default. Significant increases in homes for sale during recessionary
economic periods may depress the prices at which foreclosed homes may be sold
or delay the timing of such sales. There can be no assurance that the housing
markets will be adequate for the sale of foreclosed homes and any material
deterioration of such markets could reduce recoveries from the sale of
repossession inventory.
CERTAIN COMMERCIAL LOAN ORIGINATION AND SERVICING RISKS
When borrowers are delinquent in making monthly payments on commercial
mortgage loans serviced by the Company, the Company is required to advance
interest payments with respect to such delinquent loans to the extent that the
Company deems such advances ultimately recoverable. These advances require
funding from the Company's capital resources but have priority of repayment
from collections or recoveries on the loans in the related pool in the
succeeding month. In the ordinary course of its business, the Company is
subject to claims made against it by borrowers and private investors arising
from, among other things, losses that are claimed to have been incurred as a
result of alleged breaches of fiduciary obligations, misrepresentations, errors
and omissions of employees and officers of the Company (including its
appraisers), incomplete documentation and failures by the Company to comply
with various laws and regulations applicable to its business. The Company
believes that liability with respect to any currently asserted claims or legal
actions is not likely to be material to the Company's consolidated financial
position or results of operations; however, any claims asserted in the future
may result in legal expenses or liabilities which could have a material adverse
effect on the Company's financial position and results of operations.
As a participant in the Fannie Mae DUS program, the Company must
accept a first loss risk on loans originated by the Company. In addition, the
Company must also make certain representations and warranties concerning loans
originated by the Company and sold to Conduit Purchasers or Fannie Mae. These
representations cover such matters as title to the property, lien priority,
environmental reviews and certain other matters.
ASSET PERFORMANCE ASSUMPTIONS
The Company's business, financial condition, results of operations and
liquidity depend, to a material extent, on the performance of loans owned
directly or backing securities purchased and sold by the Company. The carrying
value of the Company's Asset Portfolios and certain other assets has been
determined in part using estimates of future cash flows based on assumptions
concerning future default and prepayment rates that are consistent with the
Company's historical experience and market conditions and present value
discount rates that the Company believes would be requested by an unrelated
purchaser of an identical stream of estimated cash flows. Management believes
that the Company's estimates of cash flows were reasonable at the time such
estimates were made. However, the actual rates of default and/or prepayment on
such assets may exceed those estimated and
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consequently may adversely affect anticipated future cash flows, results of
operations and reported earnings. The Company periodically reviews its loss and
prepayment assumptions in relation to current performance of the loans and
market conditions and, if necessary, provides for the impairment of the
respective asset. The Company's business, financial condition and results of
operations could be materially adversely affected by such adjustments in the
future. No assurance can be given that loan losses and prepayments will not
exceed the Company's estimates or that such assets could be sold at their
stated value on the balance sheet, if at all.
INTEREST RATES
Since certain of the Company's borrowings, including borrowings under
the Revolving Loan Agreement, are at variable rates of interest, the Company
may be impacted by increases in interest rates. In addition, the value of its
interest-earning assets and liabilities may be directly affected by the level
of and fluctuations in interest rates. The Company monitors the interest rate
environment and employs prefunding or other hedging strategies designed to
mitigate the impact of changes in interest rates. However, there can be no
assurance that the profitability of the Company would not be adversely affected
during any period of changes in interest rates. A significant decline in
interest rates could result in increased prepayment of outstanding loans.
A substantial and sustained increase in interest rates could adversely
affect the ability of the Company to originate loans and could reduce the gains
recognized by the Company upon their securitization and sale. A significant
decline in interest rates could decrease the size of the Company's residential
Subordinated Certificates by increasing the level of loan prepayments.
Fluctuating interest rates also may affect the net interest income earned by
the Company resulting from the difference between the yield to the Company on
mortgage loans held pending sale and the interest paid by the Company for funds
borrowed under the Company's warehouse credit facilities or otherwise. In
addition, inverse or flattened interest yield curves could have an adverse
impact on the earnings of the Company because the loans pooled and sold by the
Company have long-term rates while the senior interests in the related trusts
are priced on the basis of intermediate rates.
GOVERNMENT REGULATION
The operations of the Company are subject to regulation by federal,
state and local government authorities, as well as to various laws and judicial
and administrative decisions, that impose requirements and restrictions
affecting, among other things, the Company's loan originations, credit
activities, maximum interest rates, finance and other charges, disclosures to
customers, the terms of secured transactions, collection, repossession and
claims handling procedures, multiple qualification and licensing requirements
for doing business in various jurisdictions, and other trade practices.
Although the Company believes that it is in compliance in all material respects
with applicable local, state and federal laws, rules and regulations, there can
be no assurance that more restrictive laws, rules or regulations will not be
adopted in the future that could make compliance more difficult or expensive,
restrict the Company's ability to originate, purchase or sell loans, further
limit or restrict the amount of interest and other charges earned on loans
originated or purchased by the Company, further limit or restrict the terms of
loan agreements, or otherwise adversely affect the business or prospects of the
Company. There are also, among other risks, uncertainties concerning the
business practice of paying back points to residential mortgage brokers.
RISKS OF HEDGING TRANSACTIONS
The Company has in the past and may in the future enter into interest
rate or foreign currency financial instruments used for hedging purposes. While
intended to reduce the effects of volatility in interest rate or foreign
currency price movements, such transactions could cause the Company to
recognize losses depending on the terms of the instrument and the interest rate
or foreign currency price movement.
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FOREIGN OPERATIONS
The Company's asset management business has entered into, and intends
to continue to enter into, contracts to purchase and to manage and resolve
Asset Portfolios located in Canada and Western Europe and may in the future
expand into other foreign countries. Foreign operations are subject to various
special risks, including currency translation risks and currency exchange rate
fluctuations (which the Company intends to mitigate with currency hedging
arrangements as available and economical) and exchange controls. Changes in
foreign exchange rates may have an adverse effect on the Company's financial
condition and results of operations. In addition, earnings of foreign
operations are subject to foreign income taxes that reduce cash flow available
to meet debt service requirements and other obligations of the Company, which
may be payable even if the Company has no earnings on a consolidated basis.
COMPETITION
All of the business lines in which the Company operates are highly
competitive. Some of the Company's principal competitors in certain business
lines are substantially larger and better capitalized than the Company. Because
of these resources, these companies may be better able than the Company to
obtain new customers, to acquire Asset Portfolios, to pursue new business
opportunities or to survive periods of industry consolidation. Moreover, there
cannot be any assurance that Asset Portfolio purchasers/owners for whom the
Company provides Asset Portfolio management services will not build their own
management and resolution staffs and reduce or eliminate their outsourcing of
these services.
The Company is experiencing greater competition in its residential
mortgage banking business. The Company has experienced increasing competition
from other Conduit Purchasers in the acquisition of Sub-prime loan portfolios.
In addition, the Company expects to encounter significant competition in the
Sub-prime loan origination market.
Acquisitions of Asset Portfolios are often based on competitive
bidding, where there are dangers of bidding too low (which generates no
business), as well as of bidding too high (which could win the Asset Portfolio
at an economically unattractive price). In addition, the increasing competition
in this business line has caused the Company to experience decreasing profit
margins in its Asset Portfolio business in order to remain a competitive bidder
for Asset Portfolios and has caused the Company to redeploy its capital in
other more profitable product lines.
The Company also encounters significant competition in its other
business lines. The commercial mortgage banking business is highly fragmented
with certain large national competitors and significant localized competition.
In addition, within the commercial loan origination and residential mortgage
securitization business, access to and the cost of capital are critical to the
Company's ability to compete. The Company must compete with numerous
competitors, many of whom have superior access to capital sources and can
arrange or obtain lower cost capital for customers.
ANTI-TAKEOVER CONSIDERATIONS
The Company's Amended and Restated Certificate of Incorporation and
Amended and Restated Bylaws include a number of provisions that may have the
effect of encouraging persons considering unsolicited tender offers or other
unilateral takeover proposals to negotiate with the Company's Board of
Directors rather than pursue non-negotiated takeover attempts. These provisions
include a staggered Board of Directors, authorized "blank check" Preferred
Stock, supermajority voting requirements on certain matters and prohibitions
against certain business combinations. The Indentures governing the Senior
Subordinated Notes due 2003, the Senior Subordinated Notes due 2004, and the
Senior Notes require the Company to repurchase all outstanding Senior
Subordinated Notes due 2003, Senior Subordinated Notes due 2004 and Senior
Notes in the event of certain change
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of control transactions. These anti-takeover provisions could have the effect
of discouraging or making more difficult a merger, tender offer, other business
combination or proxy contest, even if such event would be favorable to the
interests of the stockholders. See "Description of Capital Stock -- Delaware
Law and Certain Corporate Provisions."
RECENT DEVELOPMENTS
COMMERCIAL LENDING CORPORATION ACQUISITION
On March 31, 1997, the Company purchased all of the outstanding
capital stock of CLC, an originator, securitizer and servicer of franchise and
commercial mortgage loans, for (i) 1,335,203 shares of Common Stock and (ii) an
additional number of shares of Common Stock issuable periodically based on the
operating performance of CLC from March 31, 1997 through March 31, 2000 (the
"CLC Earnout"). In addition, the Company acquired certain management contract
rights from CLC IO, a sister company of CLC, for (i) 600,336 shares of Common
Stock and (ii) an additional number of shares of Common Stock to be issued
after CLC's next securitization.
OFFERING OF SENIOR SUBORDINATED NOTES DUE 2004
On March 12, 1997, the Company completed a public offering of $192.5
million aggregate principal amount of Senior Subordinated Notes due 2004. The
Senior Subordinated Notes due 2004 were registered pursuant to the Company's
$250.0 million shelf registration statement, which was declared effective by
the Securities and Exchange Commission on July 1, 1996. The Senior Subordinated
Notes offering was the second takedown from such shelf registration statement.
The first takedown was the $57.5 million offering of the Senior Notes. The
price to the public of the $192.5 million second takedown was 99.701% and the
underwriting discount was 2.75%. The net proceeds of the offering were used to
reduce outstanding bank borrowings. The Senior Subordinated Notes due 2004
mature on March 15, 2004 and are not redeemable prior to maturity. Interest on
the Senior Subordinated Notes due 2004 is payable semi-annually on March 15 and
September 15 of each year, at the rate of 10% per annum beginning September 15,
1997. The Senior Subordinated Notes due 2004 are not secured.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of Common
Stock by the Selling Shareholders.
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SELLING SHAREHOLDERS
This Prospectus covers offers from time to time by each Selling
Shareholder of the Common Stock owned by such person. The registration of the
shares of Common Stock offered for resale hereby is pursuant to the CLC
Registration Rights Agreement.
The following table lists the name of each Selling Shareholder, the
number of shares of Common Stock owned by each Selling Shareholder before this
Offering, the number of shares of Common Stock that may be offered by each
Selling Shareholder pursuant to this Prospectus and the number of shares of
Common Stock to be owned by each Selling Shareholder upon completion of the
Offering if all shares registered hereby are sold. None of the Selling
Shareholders has held any position or office or had any other material
relationship with the Company or any of its predecessors or affiliates in the
last three years. The information below is as of the date of this Prospectus.
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF SHARES NUMBER OF SHARES
NAME OF SHARES OWNED BEING REGISTERED OWNED AFTER
SELLING SHAREHOLDERS BEFORE THIS OFFERING FOR RESALE THIS OFFERING(1)
- -------------------- -------------------- ---------------- ----------------
<S> <C> <C> <C>
CLC IO, Inc. 600,336 600,336 0
Lowell Fulkerson (2) 313,537 50,000 263,537
Todd Lindsey (2) 305,845 305,845 0
John Prehn (2) 317,383 317,383 0
Peter Wachtell (2) 317,383 317,383 0
TOTAL 1,854,484 1,590,947 263,537
========= ========= =========
</TABLE>
(1) Assumes all shares held by such Selling Shareholder and registered
hereby will be offered and sold.
(2) Certain Selling Stockholders, other than CLC IO, may transfer some or
all of their shares of Common Stock into trusts, limited partnerships
or other limited liability entities, in which case, sales of the Common
Stock may be made by such trusts, limited partnerships or other limited
liability entities. This Prospectus also covers any sales of Common
Stock by such trusts, limited partnerships or other limited liability
entities.
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DESCRIPTION OF CAPITAL STOCK
The Company is authorized to issue 50,000,000 shares of Common Stock
and 5,000,000 shares of Preferred Stock. As of April 2, 1997, the Company had
issued and outstanding 35,993,714 shares of Common Stock and no shares of
Preferred Stock. As of such date, there were approximately 2,800 holders of
record of the outstanding shares of Common Stock.
The following summary of the Company's Common Stock and Preferred
Stock is qualified in its entirety by reference to the Company's Amended and
Restated Certificate of Incorporation (the "Certificate of Incorporation"), its
Amended and Restated Bylaws (the "Bylaws"), and the Delaware General
Corporation Law, as amended (the "DGCL").
COMMON STOCK
Subject to such preferential rights as may be granted by the Board of
Directors in connection with any issuances of Preferred Stock, holders of
shares of Common Stock are entitled to receive such dividends as may be
declared by the Board of Directors in its discretion from funds legally
available therefor. From October 1993 through October 1995, the Company paid a
quarterly dividend of $0.05 per share on shares of Common Stock. In October
1995, the Company announced that it would discontinue its policy of paying cash
dividends. The Board of Directors determined to retain all earnings to support
anticipated growth in the current operations of the Company and to finance
future expansion. The Company's Revolving Loan Agreement and the indentures
governing certain of the Company's debt securities restrict the payment of cash
dividends unless certain earnings tests are satisfied. Additional restrictions
on the payment of cash dividends may be imposed in connection with future
issuances of Preferred Stock and indebtedness by the Company. Further
declarations and payments of cash dividends, if any, will be determined in
light of then-current conditions, including the Company's earnings, operations,
capital requirements, liquidity, financial condition, restrictions in financing
agreements and other factors deemed relevant by the Board of Directors. Upon
the liquidation, dissolution or winding up of the Company, after payment of
creditors, the remaining net assets of the Company will be distributed pro rata
to the holders of Common Stock, subject to any liquidation preference of the
holders of Preferred Stock. There are no preemptive rights, conversion rights,
or redemption or sinking fund provisions with respect to the shares of Common
Stock. All of the outstanding shares of Common Stock are duly and validly
authorized and issued, fully paid and non-assessable.
Holders of Common Stock are entitled to one vote per share of Common
Stock held of record on all such matters submitted to a vote of the
shareholders. With respect to any act or action required of or by the holders
of the Common Stock, the affirmative vote of a majority of the shares of Common
Stock present in person or represented by proxy at a meeting and entitled to
vote thereon is sufficient to authorize, affirm, ratify or consent to such act
or actions, except as otherwise provided by law or in the Certificate of
Incorporation. The DGCL requires the approval of the holders of a majority of
the outstanding stock entitled to vote for certain extraordinary corporate
transactions, such as a merger, sale of substantially all assets, dissolution
or amendment of the Certificate of Incorporation. Holders of the shares of
Common Stock do not have cumulative voting rights. As a result, the holders of
a majority of the outstanding shares of Common Stock voting for the election of
directors can elect all the directors, and, in such event, the holders of the
remaining shares of Common Stock will not be able to elect any persons to the
Board of Directors.
PREFERRED STOCK
The Board of Directors may, without approval of the Company's
shareholders, from time to time, authorize the issuance of Preferred Stock in
one or more series for such consideration and, within certain limits, with such
relative rights, preferences and limitations as the Board of Directors may
determine. The relative rights, preferences and limitations that the Board of
Directors has the
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authority to determine as to any such series of Preferred Stock include, among
other things, dividend rates, voting rights, conversion rights, redemption
rights and liquidation preferences. Because the Board of Directors has the
power to establish the relative rights, preferences and limitations of each
series of Preferred Stock, it may afford to the holders of any such series
preferences and rights senior to the rights of the holders of shares of Common
Stock. Although the Board of Directors has no intention at the present time of
doing so, it could cause the issuance of Preferred Stock that could discourage
an acquisition attempt or other transaction that some, or a majority of, the
shareholders might believe to be in their best interest or in which the
shareholders might receive a premium for their shares of Common Stock over the
market price of such shares.
DELAWARE LAW AND CERTAIN CORPORATE PROVISIONS
The Company is subject to the provisions of Section 203 of the DGCL.
In general, this statute prohibits a publicly-held Delaware corporation from
engaging, under certain circumstances, in a "business combination" with an
"interested shareholder" for a period of three years after the date of the
transaction in which the person becomes an interested shareholder, unless
either (i) prior to the date at which the shareholder became an interested
shareholder the Board of Directors approved either the business combination or
the transaction in which the person became an interested shareholder, (ii) the
shareholder acquires more than 85% of the outstanding voting stock of the
corporation (excluding shares held by directors who are officers or held in
certain employee stock plans) upon consummation of the transaction in which the
shareholder became an interested shareholder or (iii) the business combination
is approved by the Board of Directors and by two-thirds of the outstanding
voting stock of the corporation (excluding shares held by the interested
shareholder) at a meeting of the shareholders (and not by written consent) held
on or subsequent to the date on which the person became an "interested
shareholder" of the business combination. An "interested shareholder" is a
person who, together with affiliates and associates, owns (or is an affiliate
or associate of the corporation and, together with affiliates and associates,
at any time within the prior three years did own) 15% or more of the
corporation's voting stock and the affiliates and associates of such person.
Section 203 defines a "business combination" to include, without limitation,
mergers, consolidations, stock sales and asset based transactions and other
transactions resulting in a financial benefit to the interested shareholder.
The Company's Certificate of Incorporation and Bylaws contain a number
of provisions relating to corporate governance and to the rights of
shareholders. Certain of these provisions may be deemed to have a potential
"anti-takeover" effect in that such provisions may delay, defer or prevent a
change of control of the Company. These provisions include (i) the
classification of the Board of Directors into three classes, each class serving
for staggered three-year terms; (ii) the authority of the Board of Directors to
determine the size of the Board of Directors, subject to certain minimums and
maximums; (iii) a requirement that special meetings of shareholders may be
called only by the Board of Directors, the Chairman of the Board or holders of
at least one-tenth of all the shares entitled to vote at the meeting; (iv) the
elimination of shareholder action by written consent; (v) the authority of the
Board of Directors to issue series of Preferred Stock with such voting rights
and other powers as the Board of Directors may determine; (vi) the requirement
that the Article in the Certificate of Incorporation creating the staggered
board may only be amended by the vote of at least 66% of the voting securities
of the Company; and (vii) a requirement that certain business combinations
between the Company and a record or beneficial owner of more than five percent
of any class of an equity security of the Company must be approved by the
holders of a majority of the Company's securities, excluding those securities
held by such record or beneficial owner, voted at a meeting called for the
purpose of approving such business combination.
INDEMNIFICATION AND LIMITED LIABILITY
The Company's Certificate of Incorporation and Bylaws require the
Company to indemnify the directors and officers of the Company to the fullest
extent permitted by law. In addition, as permitted
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by the DGCL, the Company's Certificate of Incorporation and Bylaws provide that
no director of the Company will be personally liable to the Company or its
shareholders for monetary damages for such director's breach of duty as a
director. This limitation of liability does not relieve directors from
liability for (i) any breach of the director's duty of loyalty to the Company
or its shareholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) any liability under
Section 174 of the DGCL for unlawful distributions, or (iv) any transaction
from which the director derived an improper personal benefit. This provision of
the Certificate of Incorporation will limit the remedies available to a
shareholder who is dissatisfied with a decision of the Board of Directors
protected by this provision, and such shareholder's only remedy in that
circumstance may be to bring a suit to prevent the action of the Board of
Directors. In many situations, this remedy may not be effective, including
instances when shareholders are not aware of a transaction or an event prior to
action of the Board of Directors in respect of such transaction or event.
Subject to certain limitations, the Company's executive officers and
directors are insured against losses arising from claims made against them for
wrongful acts which they may become obligated to pay or for which the Company
may be required to indemnify them.
REGISTRATION RIGHTS
In connection with the CLC Acquisition, the Company entered into an
agreement granting registration rights (the "CLC Registration Rights
Agreement") to (i) the former owners of CLC, including the Selling
Shareholders, and (ii) CLC IO. Pursuant to the CLC Registration Rights
Agreement, these holders may exercise demand or "piggyback" registration rights
with respect to shares of Common Stock paid to them at the closing of the CLC
Acquisition or subsequently paid to them pursuant to the CLC Earnout. The
Company is obligated to register Common Stock up to three times pursuant to the
demand registration rights provisions of the CLC Registration Rights Agreement.
The registration rights cease to apply to shares of Common Stock when such
shares (i) have been effectively registered under the Securities Act and sold
or distributed pursuant to an effective registration statement or (ii) have
become eligible to be sold or distributed pursuant to Rule 144 (within the
then-applicable volume limitation pursuant to Rule 144(e)) or Rule 144(k).
These registration rights are subject to certain conditions and limitations,
including the right of underwriters to restrict the number of shares offered in
a "piggyback" registration.
In addition, the Company has entered into an agreement granting
registration rights (the "Prior Registration Rights Agreement") with certain
holders of Common Stock including Mr. James P. Cotton, Jr. and Mr. Gerald E.
Eickhoff (both of whom are directors of the Company). Pursuant to the Prior
Registration Rights Agreement, these holders may exercise demand or "piggyback"
registration rights with respect to shares of Common Stock held by them. The
Company is obligated to register stock on only two occasions pursuant to the
demand registration rights. The Prior Registration Rights Agreement has a term
of three years for demand registration rights and five years for "piggyback"
registration rights. These registration rights are subject to certain
conditions and limitations, including the right of underwriters to restrict the
number of shares offered in a registration.
OTHER MATTERS
The Common Stock is listed on Nasdaq National Market under the symbol
"AMMB." The Bank of New York is the transfer agent and registrar for the Common
Stock.
20
<PAGE> 22
PLAN OF DISTRIBUTION
The shares of Common Stock covered hereby may be offered and sold from
time to time by the Selling Shareholders. The Selling Shareholders will act
independently of the Company in making decisions with respect to the timing,
manner and size of each sale. Such sales may be made in the over-the-counter
market or otherwise, at market prices prevailing at the time of the sale, at
prices related to the then prevailing market price or in negotiated
transactions, including pursuant to an underwritten offering or pursuant to one
or more of the following methods: (i) purchases by a broker-dealer as principal
and resale by such broker or dealer for its account pursuant to this
Prospectus; (ii) ordinary brokerage transactions and transactions in which a
broker solicits purchasers; and (iii) block trades in which a broker-dealer so
engaged will attempt to sell the shares as agent but may take a position and
resell a portion of the block as principal to facilitate the transaction. In
effecting sales, broker-dealers engaged by the Selling Shareholders may arrange
for other broker-dealers to participate. Broker-dealers may receive commissions
or discounts from the Selling Shareholders in amounts to be negotiated
immediately prior to the sale.
In connection with the sale of shares of Common Stock covered hereby,
underwriters or agents may receive compensation from the Selling Shareholders
or from purchasers of the shares of Common Stock covered hereby for whom they
may act as agents, in the form of discounts, concessions or commissions.
Underwriters may sell shares of Common Stock to or through dealers and such
dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions from the purchasers for
whom they act as agents. Underwriters, dealers and agents that participate in
the distribution of shares of Common Stock covered hereby may be deemed to be
underwriters, and any discounts or commissions received by them from the
selling Shareholders and any profit on the resale of shares of Common Stock by
them may be deemed to be underwriting discounts and commissions under the
Securities Act.
The CLC Registration Rights Agreement provides that the Company will
indemnify the Selling Shareholders against certain liabilities, including
liabilities under the Securities Act.
This Offering will terminate on the earlier of (i) the date on which
all shares offered hereby have been sold by the Selling Shareholders or (ii)
the 120th day after the date hereof.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be
passed upon for the Company by L. Keith Blackwell, General Counsel of the
Company. Mr. Blackwell currently owns beneficially 8,904 shares of Common Stock
(excluding 10,501 unvested shares allocated under the Company's restricted
stock plan) and holds options to purchase 46,165 shares of Common Stock.
EXPERTS
The consolidated financial statements incorporated in this prospectus
by reference from the Company's Annual Report on Form 10-K for the year ended
December 31, 1996 have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report which is incorporated herein by reference
and has been so incorporated in reliance upon their authority as experts in
accounting and auditing.
The consolidated balance sheets of Quality as of September 30, 1995
and 1996, and the consolidated statements of income, stockholders' equity and
cash flows for each of the two years in the period ended September 30, 1996,
incorporated by reference in this Prospectus, have been incorporated by
reference herein in reliance of the report of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
21
<PAGE> 23
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee................ $ 7,925
Nasdaq National Market Listing Fee................................. 17,500
Printing Expenses.................................................. 3,000
Accounting Fees and Expenses....................................... 4,000
Legal Fees and Expenses............................................ 5,000
Fees of Transfer Agent and Registrar............................... 500
Miscellaneous Expenses............................................. 2,075
---------
Total........................................................... $ 40,000
=========
</TABLE>
All of the above expenses except the Securities and Exchange
Commission registration fee and the Nasdaq National Market listing fee are
estimated. All of such expenses will be borne by the Company.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Amended and Restated Certificate of Incorporation (the
"Certificate") and the Company's Amended and Restated Bylaws (the "Bylaws")
provide that the Company shall indemnify, to the full extent permitted by law,
any person against liabilities arising from their service as directors,
officers, employees or agents of the Company. Section 145 of the DGCL empowers
a corporation to indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation) by reason of the fact
that he is or was a director, officer, employee or agent of the corporation or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorney's fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and
in a manner he reasonably believed to be in, or not opposed to, the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful.
Section 145 also empowers a corporation to indemnify any person who
was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the corporation to
procure a judgment in its favor by reason of the fact that such person acted in
any of the capacities set forth above, against expenses (including attorney's
fees) actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted under similar standards, except
that no indemnification may be made in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable to the corporation
unless, and only to the extent that, the Court of Chancery or the court in
which such action was brought shall determine that despite the adjudication of
liability such person is fairly and reasonably entitled to indemnify for such
expenses which the court shall deem proper.
Section 145 further provides that indemnification provided for by
Section 145 shall not be deemed exclusive of any other rights to which the
indemnified party may be entitled, and that the corporation is empowered to
purchase and maintain insurance on behalf of a director or officer of the
corporation against any liability asserted against him and incurred by him in
any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liabilities
under Section 145.
II-1
<PAGE> 24
The Certificate and the Bylaws provide that no director of the Company
shall be personally liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for liability (i)
for any breach of the director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174
of the DGCL or (iv) for any transaction from which the director derived an
improper personal benefit. Any repeal or modification of this provision related
to director's liability shall not adversely affect any right or protection of a
director of the Company existing immediately prior to such repeal or
modification. Further, if the DGCL shall be repealed or modified, the
elimination of liability of a director provided in the Certificate and the
Bylaws shall be to the fullest extent permitted by the DGCL as so amended.
Pursuant to Registration Rights Agreements with certain stockholders
of the Company, the Company has agreed to indemnify such stockholders against
certain liabilities, including liabilities under the Securities Act or
otherwise. For the undertaking with respect to indemnification, see Item 17
herein.
ITEM 16. EXHIBITS
EXHIBIT NO. EXHIBIT
4.1 Restated Certificate of Incorporation, as amended, filed as
Exhibit 3(i) to the Company's Form 10-Q for the quarter
ended September 30, 1995, as amended by Form 10-Q/A No. 1
dated October 25, 1995 (the "September 1995 10-Q"), which
exhibit is incorporated herein by reference.
4.2 Amended and Restated Bylaws as of May 23, 1994, filed as
Exhibit 3(f) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1995, which exhibit is
incorporated herein by reference.
4.3 Revolving Loan Agreement, dated as of September 29, 1995,
among the Company, certain subsidiaries of the Company,
NationsBank of Texas, N.A. as Agent, and the Banks named
therein, filed as Exhibit 10(b) to the Company's September
1995 10-Q, which exhibit is incorporated herein by
reference.
4.4 First Amendment to Credit Agreement, dated as of November
21, 1995, among the Company and NationsBank of Texas, N.A.,
as agent, and the Banks named therein, and consented to by
certain of the Company's subsidiaries, filed as Exhibit 4.2
to the Company's Registration Statement on Form S-3 (No.
33-65329), which exhibit is incorporated herein be
reference.
4.5 Specimen Common Stock Certificate, filed as Exhibit 4.4 to
the Company's Registration Statement on Form S-3 (No.
33-63683), which exhibit is incorporated herein by
reference.
4.6* Registration Rights Agreement, dated as of March 31, 1997,
by and among the Company and Lowell Fulkerson, Todd Lindsey,
Matthew Moore, John Prehn, Peter Wachtell and CLC IO, Inc.
5.1* Opinion of L. Keith Blackwell, General Counsel of the
Company, as to the validity of Common Stock to be offered.
23.1* Consent of L. Keith Blackwell, contained in the opinion
filed as Exhibit 5.1.
23.2* Consent of Deloitte & Touche LLP.
23.3* Consent of Coopers & Lybrand, L.L.P.
24.1* Power of Attorney of the Directors and certain Executive
Officers of the Company.
- --------------
* Filed herewith.
II-2
<PAGE> 25
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)
(3) of the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events
arising after the effective date of the registration
statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the registration statement;
(iii) to include any material information with respect to
the plan of distribution not previously disclosed in
the registration statement or any material change to
such information in the registration statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in this registration statement.
(2) that, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof; and
(3) to remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes that, for the purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in this
Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-3
<PAGE> 26
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of Prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in a
form of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
Prospectus shall be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 27
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Dallas, State of Texas, on the 16th day of
April, 1997.
AMRESCO, INC.
By: /s/ L. KEITH BLACKWELL
-----------------------------------
L. Keith Blackwell
General Counsel and Secretary
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the 16th day of April, 1997:
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
ROBERT H. LUTZ, JR.* Chairman of the Board and
- ----------------------------------- Chief Executive Officer
Robert H. Lutz, Jr.
ROBERT L. ADAIR III* Director, President and
- ----------------------------------- Chief Operating Officer
Robert L. Adair III
BARRY L. EDWARDS* Executive Vice President and
- ----------------------------------- Chief Financial Officer
Barry L. Edwards (Principal Financial Officer)
JAMES P. COTTON, JR.* Director
- -----------------------------------
James P. Cotton, Jr.
RICHARD L. CRAVEY* Director
- -----------------------------------
Richard L. Cravey
GERALD E. EICKHOFF* Director
- -----------------------------------
Gerald E. Eickhoff
WILLIAM S. GREEN* Director
- -----------------------------------
William S. Green
AMY J. JORGENSEN* Director
- -----------------------------------
Amy J. Jorgensen
JOHN J. MCDONOUGH* Director
- -----------------------------------
John J. McDonough
BRUCE W. SCHNITZER* Director
- -----------------------------------
Bruce W. Schnitzer
RONALD B. KIRKLAND* Vice President and Chief
- ----------------------------------- Accounting Officer
Ronald B. Kirkland (Principal Accounting Officer)
</TABLE>
II-5
<PAGE> 28
L. Keith Blackwell, by signing his name hereto, does sign and execute
this Registration Statement on behalf of each of the above-named officers and
directors of the Registrant on this 16th day of April, 1997, pursuant to powers
of attorneys executed on behalf of each of such officers and directors, and
filed with the Securities and Exchange Commission.
*By: /s/ L. KEITH BLACKWELL
---------------------------------
L. Keith Blackwell
Attorney-in-Fact
II-6
<PAGE> 29
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NO. EXHIBIT PAGE
----------- ------- ------------
<S> <C>
4.1 Restated Certificate of Incorporation, as amended, filed as
Exhibit 3(i) to the Company's Form 10-Q for the quarter
ended September 30, 1995, as amended by Form 10-Q/A No. 1
dated October 25, 1995 (the "September 1995 10-Q"), which
exhibit is incorporated herein by reference.
4.2 Amended and Restated Bylaws as of May 23, 1994, filed as
Exhibit 3(f) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1995, which exhibit is
incorporated herein by reference.
4.3 Revolving Loan Agreement, dated as of September 29, 1995,
among the Company, certain subsidiaries of the Company,
NationsBank of Texas, N.A. as Agent, and the Banks named
therein, filed as Exhibit 10(b) to the Company's September
1995 10-Q, which exhibit is incorporated herein by
reference.
4.4 First Amendment to Credit Agreement, dated as of November
21, 1995, among the Company and NationsBank of Texas, N.A.,
as agent, and the Banks named therein, and consented to by
certain of the Company's subsidiaries, filed as Exhibit 4.2
to the Company's Registration Statement on Form S-3 (No.
33-65329), which exhibit is incorporated herein be
reference.
4.5 Specimen Common Stock Certificate, filed as Exhibit 4.4 to
the Company's Registration Statement on Form S-3 (No.
33-63683), which exhibit is incorporated herein by
reference.
4.6* Registration Rights Agreement, dated as of March 31, 1997,
by and among the Company and Lowell Fulkerson, Todd Lindsey,
Matthew Moore, John Prehn, Peter Wachtell and CLC IO, Inc.
5.1* Opinion of L. Keith Blackwell, General Counsel of the
Company, as to the validity of Common Stock to be offered.
23.1* Consent of L. Keith Blackwell, contained in the opinion
filed as Exhibit 5.1.
23.2* Consent of Deloitte & Touche LLP.
23.3* Consent of Coopers & Lybrand, L.L.P.
24.1* Power of Attorney of the Directors and certain Executive
Officers of the Company.
</TABLE>
- ------------------------
* Filed herewith.
<PAGE> 1
EXHIBIT 4.6
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is entered into
as of March 31, 1997, by and among AMRESCO, INC., a Delaware corporation (the
"Company"), on the one hand, and Lowell Fulkerson, Todd Lindsey, Matthew Moore,
John Prehn, Peter Wachtell anc CLC IO, Inc. (collectively, the "Stockholders"),
on the other hand.
R E C I T A L S
A. This Agreement is entered into pursuant to the Stock and Asset
Purchase Agreement dated as of March 21, 1997 (the "Stock and Asset
Purchase Agreement"), by and among the Company, Commercial Lending
Corporation, each of the Stockholders and their spouses.
B. The Stock and Asset Purchase Agreement provides for the issuance by
the Company of an aggregate of 1,335,203 shares of its common stock,
par value $0.05 per share (each share of such class being referred to
herein as a share of "Common Stock"), to the respective Stockholders
on the date hereof and 600,336 shares of Common Stock to CLC IO on the
date hereof (the shares issued on such date being referred to herein
as the "Original Shares").
C. The Stock and Asset Purchase Agreement also provides for the issuance
by the Company of an as yet undetermined number of shares of Common
Stock to CLC IO after the first securitization following the date
hereof and to the respective Stockholders (other than CLC IO) on or
before each of March 31, 1998, March 31, 1999 and June 30, 2000 (each
such date being referred to herein as an "Earnout Payment Date" and
the shares of Common Stock (if any) being issued on any Earnout
Payment Date (or to CLC IO after the first securitization following
the date hereof) being referred to herein as "Earnout Shares").
D. The Company and the Stockholders wish to provide for the registration
of the Original Shares and the Earnout Shares on the terms and
conditions set forth herein.
A G R E E M E N T
Based on the recitals set forth above and the promises contained
herein, the parties agree as follows:
<PAGE> 2
1. Definitions. Any capitalized terms used but not defined
herein shall have the meanings assigned to such terms in the Stock and Asset
Purchase Agreement. As used herein, the following terms shall have the
following meanings:
"Agreement" has the meaning set forth in the preamble.
"Blocking Notice" has the meaning set forth in Section 12.
"Blocking Period" has the meaning set forth in Section 12.
"Blocking Termination Notice" has the meaning set forth in Section 12.
"Closing Date" means the date of this Agreement.
"Company" has the meaning set forth in the preamble.
"Company Shares" has the meaning set forth in Section 13.
"Common Stock" has the meaning set forth in the Recitals.
"Demand Notice" has the meaning set forth in Section 3.
"Demand Registration" means a registration pursuant to Section 3.
"Earnout Payment Date" has the meaning set forth in the Recitals.
"Earnout Shares" has the meaning set forth in the preamble.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time.
"Information" has the meaning set forth in Section 5.
"Majority" means three or more of the Stockholders; provided, however,
that if any Stockholder transfers any Shares (together with the related
registration rights) to a permitted transferee under Section 18(a), then to the
extent such Stockholder retains any Shares, for purposes of this definition
such Stockholder and such permitted transferee shall be deemed to be one
Stockholder.
"Original Shares" has the meaning set forth in the Recitals.
"Other Holders" has the meaning set forth in Section 13.
2
<PAGE> 3
"Piggyback Notice" has the meaning set forth in Section 13.
"Piggyback Registration Statement" has the meaning set forth in
Section 13.
"Piggyback Shares" has the meaning set forth in Section 13.
"Prospectus" has the meaning set forth in Section 9(b).
"Registration Expenses" means all costs and expenses of each
Registration Statement, including without limitation printing, legal and
accounting expenses, SEC filing fees and "Blue Sky" fees and expenses relating
to the registration of Shares; provided, however, that "Registration Expenses"
also shall mean the reasonable fees and disbursements of a single special
counsel for the Selling Stockholders (selected by a Majority of the Selling
Stockholders) in connection with (a) a Registration Statement in which the
Company has required that the Selling Stockholders utilize an underwriter or
(b) any sale of Shares pursuant to Rule 144 in connection with which a Selling
Stockholder is required to furnish an opinion of counsel to the effect that the
legend on such Shares may be removed.
"Registration Notice" has the meaning set forth in Section 4(b).
"Registration Statement" means any registration statement under the
Securities Act that is filed by the Company to register sales of Shares by
Selling Stockholders (whether or not such registration statement also registers
the issuance or sale of other securities).
"Rule 144" means Rule 144 (as currently in effect or as amended or any
successor or similar provision) promulgated by the SEC under the Securities
Act.
"Rule 415" means Rule 415 (as currently in effect or as amended or any
successor or similar provision) promulgated by the SEC under the Securities
Act.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended from
time to time.
"Selling Expenses" means all underwriters' commissions or discounts,
brokers' fees or commissions, transfer or other taxes attributable to Shares
being offered and sold by any Selling Stockholder, all fees and expenses of
counsel incurred by any Selling Stockholder, other than such fees and expenses
as are defined as
3
<PAGE> 4
"Registration Expenses" above, and all fees and expenses of any Stockholder's
accountants.
"Selling Stockholder" means any Stockholder whose Shares (in whole or
in part) are included in a Registration Statement.
"Shares" means (a) the Original Shares and the Earnout Shares and (b)
any securities issued or issuable in respect of the Original Shares or the
Earnout Shares by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, reclassification, merger,
consolidation or similar event, and any other securities issued pursuant to any
other pro rata distribution with respect to such shares of Common Stock. For
purposes hereof, a share of Common Stock ceases to be an Original Share, an
Earnout Share or a Share (each as defined herein) when (i) it has been
effectively registered under the Securities Act and sold or distributed
pursuant to an effective Registration Statement covering it or (ii) it has
become eligible, in the opinion of counsel to the Company, to be sold or
distributed pursuant to Rule 144 (within the then-applicable volume limitation
pursuant to Rule 144(e)) or Rule 144(k).
"Stockholders" has the meaning set forth in the preamble.
"Stock and Asset Purchase Agreement" has the meaning set forth in the
Recitals.
"Violations" has the meaning set forth in Section 14(a).
2. Registration of Original Shares. The Company shall file with
the SEC, on or before the thirtieth day after the Closing Date, a Registration
Statement on a form for which the Company then qualifies and which shall be
available for the sale by the Selling Stockholders (in accordance with the
intended methods of disposition thereof) of any of the Original Shares, the
registration of which is requested in writing by any Stockholder on the Closing
Date. The Company shall use commercially reasonable efforts to cause the
Registration Statement to be declared effective under the Securities Act as
promptly as practicable thereafter.
Subject to Section 4 and Section 12, the Company will not have
exercised "commercially reasonable efforts" hereunder if the Company refuses to
file, delays the filing of or delays the effectiveness of a Registration
Statement based solely on the Company's concern that such filing or
effectiveness could have adverse consequences to the trading price of the
Common Stock or the Company's future financing transactions.
4
<PAGE> 5
3. Demand Registration. At any time after the issuance of any
Earnout Shares, a Majority of the Stockholders may require by a written notice
signed by such Stockholders and delivered to the Company (a "Demand Notice")
that the Company prepare and file as soon as practicable (but in any event
within 60 days of receipt of the Demand Notice) a Registration Statement for
the sale by the Selling Stockholders of Shares. The Company then shall use
commercially reasonable efforts to prepare and file a Registration Statement on
a form for which the Company then qualifies and which shall be available for
the sale by the Selling Stockholders (in accordance with the intended methods
of disposition thereof) of any of the Shares, the registration of which is
requested in the Demand Notice. The Company shall use commercially reasonable
efforts to cause such Registration Statement to be declared effective under the
Securities Act as promptly as practicable thereafter. The Stockholders shall
be entitled to one Demand Registration during each twelve-month period after
each Earnout Payment Date on which Shares are issued. On each Earnout Payment
Date on which Shares are issued, any unexercised right to a Demand Registration
during the preceding twelve months shall expire. A Demand Registration may
include any Shares held by any Stockholder on the date the Demand Notice is
delivered.
4. Restrictions on Demand Registration.
(a) Minimum Number of Shares. Notwithstanding anything
in Section 3 hereof to the contrary, the Company shall not be required to
effectuate a Demand Registration of fewer than 100,000 Shares.
(b) Registration Notice. Notwithstanding anything in
Section 3 hereof to the contrary, the Company shall have no obligation under
Section 3 with respect to any Demand Registration if, within 15 days after the
date of the Company's receipt of the Demand Notice, the Company notifies the
Selling Stockholders in writing (a "Registration Notice") that the Company
proposes to file, within 30 days after the date of the Registration Notice, a
registration statement on any form for the general registration of securities
for cash under the Securities Act for the account of the Company (other than in
connection with an offering solely to the Company's employees pursuant to a
registration statement on Form S-8 under the Securities Act or an offering
pursuant to a registration statement on Form S-4 under the Securities Act, or
any successor forms thereto), in which event such Demand Registration shall be
postponed until the conclusion or termination of the transaction described by
the Company in the Registration Notice; provided, however, that the Company
shall not be entitled to deliver a Registration Notice more than once in any 24
month period. To the extent permitted under Section 13, the Selling
Stockholders shall be entitled to include Shares in a registration statement
for Common Stock filed by the Company in connection with a Registration Notice.
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(c) Pending Company Registration. Notwithstanding
anything in Section 3 to the contrary, the Company shall have no obligation
under Section 3 with respect to any Demand Registration during the period
commencing 15 days prior to the filing of, and ending 180 days following the
effectiveness (or upon the withdrawal) of, any registration statement (other
than in connection with an offering solely to the Company's employees pursuant
to a registration statement on Form S-8 under the Securities Act or an offering
pursuant to a registration statement on Form S-4 under the Securities Act, or
any successor forms thereto) filed by the Company with the SEC with respect to
shares of Common Stock or securities convertible into shares of Common Stock;
provided, however, that the provisions of this paragraph shall apply only to
the extent the managing underwriter for such offering advises the Company in
writing that such managing underwriter believes application of this paragraph
(c) to be necessary for the success of such offering; provided, further, that
if this Section 4(c) is operative with respect to any Demand Registration, such
Demand Registration shall be postponed until the conclusion of the 195 day
period described in the first clause of this Section.
(d) Rule 144. Notwithstanding anything in Section 3 to
the contrary, the Company shall have no obligation to file or have declared
effective a Registration Statement for any shares of Common Stock which have
ceased to be Shares because they are eligible to be sold by any Stockholder
pursuant to Rule 144 (within the then-applicable volume limitation pursuant to
Rule 144(e)) or Rule 144(k).
5. Selling Stockholder Information. Each Selling Stockholder
shall, not later than the tenth day after the Closing Date or the tenth day
after the date on which a Demand Notice is delivered to the Company (as
applicable), furnish the Company with such information (the "Information")
regarding such Selling Stockholder, the Shares, the Selling Stockholder's
intended method of distribution of the Shares and such other information as may
be required under the Securities Act for preparation of the Registration
Statement. Each Selling Stockholder thereafter promptly shall furnish to the
Company all Information as may be requested in writing by the Company from time
to time to maintain the effectiveness of any Registration Statement.
If, within five days, a Selling Stockholder has not complied with a
written request from the Company for Information, then the Company's obligation
to register Shares on behalf of all Selling Stockholders shall be suspended
until the delinquent Selling Stockholder has complied with such request.
6. Other Securities. The Company may, in its sole discretion,
include in any Registration Statement the issuance of securities by the Company
and the sale or distribution of securities previously issued to, or securities
issuable upon exercise of options or warrants previously issued to, other
persons; provided, however, that if
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a Demand Registration Statement involves an underwritten distribution, the
Company may not include any other securities other than the Shares in such
Demand Registration Statement if, in the reasonable opinion of the managing
underwriter of such offering, the distribution of all or a portion of such
other securities would materially interfere with the registration and sale of
the Shares.
7. Means of Distribution. If any proposed distribution of Shares
by one or more Selling Stockholders pursuant to a Registration Statement is
proposed to include in the aggregate 750,000 or more Shares, then the Company
may require in the Company's sole discretion that such Shares to be distributed
by the Selling Stockholders through one or more underwriters selected by the
Company. In any proposed distribution of Shares by one or more Selling
Stockholders pursuant to a Registration Statement, the Company may require in
the Company's sole discretion that such Shares to be distributed by the Selling
Stockholders through (a) routine brokerage transactions or (b) directly
negotiated transactions (to one or more purchasers identified by the Company
who will agree to purchase the applicable Shares at a price not less than the
net price the Selling Stockholders would have received if the applicable Shares
were sold on a firm underwriting basis in a public distribution).
8. Underwritten Distributions. In any underwritten distribution
of Shares, each Selling Stockholder shall, if requested by the Company or the
underwriter or underwriters in connection with such distribution, (a) agree to
sell all or the applicable portion of such Selling Stockholder's Shares on the
basis provided in any underwriting arrangements entered into in connection
therewith and (b) complete and execute all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents that are required
under the terms of such underwriting arrangements.
9. Registration Procedures. In connection with the registration
of Shares pursuant hereto.
(a) Registration Statement Content. The Company shall
have the sole right to determine the content of any Registration Statement,
Prospectus, supplement thereto or amendment thereof; provided, however, that if
any Registration Statement refers to any Stockholder by name as the holder of
shares of Common Stock, then such Stockholder shall have the right to require
(i) the insertion in such Registration Statement of language, in form and
substance reasonably satisfactory to such Stockholder to the effect that such
Stockholder's ownership of shares of Common Stock should not be construed as a
recommendation by such Stockholder of the investment quality of the Company's
securities and that such ownership does not imply that such Stockholder will
assist in meeting any future financial requirements of the Company or (ii) the
deletion of such reference, unless counsel to the Company
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<PAGE> 8
advises the Company that such reference is required by the Securities Act or
any similar federal statute then in effect.
(b) Amendments and Supplements. The Company shall use
commercially reasonable efforts to prepare and file with the SEC such
amendments and supplements to any Registration Statement and the final
prospectus (a "Prospectus") used in connection therewith, as the Company deems
necessary to keep the Registration Statement or Prospectus in effect for a
period of 120 days from the effective date of such Registration Statement and
comply with the provisions of the Securities Act with respect to the
disposition of all Shares covered by the Registration Statement until the
earlier of such time (i) as all of such Shares have been disposed of in
accordance with the intended methods of disposition by the Stockholders as set
forth in the Registration Statement, (ii) the expiration of such 120 day period
or (iii) the deregistration of unsold Shares remaining under the Registration
Statement, pursuant to a written agreement among the Company and the holder or
holders of such unsold Shares.
(c) Exchange Listing. The Company shall use commercially
reasonable efforts to cause the Shares to be listed on the Nasdaq National
Market or such other securities exchange or national market system on which
shares of the Common Stock are principally traded at the time of such listing,
in accordance with the rules and practices of the Nasdaq National Market, such
other securities exchange or national market system and the SEC.
(d) Blue Sky Laws. The Company shall use commercially
reasonable efforts to register or qualify (to the extent required by law) the
Shares covered by any Registration Statement under the applicable securities or
"Blue Sky" laws of such jurisdictions as the Stockholders reasonably request;
provided, however, that the Company shall not be obligated so to register or
qualify any the Shares in any jurisdiction (i) if the Company would be required
to qualify to do business in any jurisdiction where it is not now so qualified,
(ii) if the Company would be required to take any action which would subject it
to the service of process in suits other than those arising out of the offer or
sale of the securities covered by the Registration Statement or subject it to
taxation in any jurisdiction where it is not now so subject or (iii) if the
Company would be required to conform its capitalization or the composition of
its assets at the time to the securities or "Blue Sky" laws of such
jurisdiction.
(e) Removal of Legend. When any Shares become eligible
under Rule 144(k) (as currently in effect or as amended or any successor or
similar provision) under the Securities Act to be sold by the applicable
Stockholder without restriction, upon the written request either of the Company
or such Stockholder, such Shares will be returned to the Company's transfer
agent in exchange for appropriate
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<PAGE> 9
new share certificates reflecting the removal of the private placement legend,
unless otherwise required by the Securities Act.
10. Stockholder Undertakings. Each Stockholder covenants with the
Company as follows:
(a) No Stabilization. No Stockholder shall effect any
stabilization transactions or engage in any stabilization activity proscribed
by Rule 10b-7 under the Exchange Act in connection with any securities of the
Company during the period of any distribution of the Shares by Selling
Stockholders pursuant to any Registration Statement.
(b) Brokers. Each Selling Stockholder (i) shall furnish
each broker through whom such Selling Stockholder offers the Shares such number
of copies of any Prospectus and any supplements thereto or amendments thereof
which such broker may require (provided that the Company has provided such
Selling Stockholder with such Prospectus, supplements and amendments), (ii)
shall inform such broker as to the number of Shares offered through such
broker, that such Shares are part of a distribution and that such broker is
subject to the provisions of Rule 10b-6 under the Exchange Act until such time
as such broker has completed the sale of all such Shares, and (iii) shall
notify such broker when distribution of the Shares by such Selling Stockholder
pursuant to any Registration Statement has been completed or any Registration
Statement is no longer effective or is withdrawn.
(c) Amendments and Supplements. Each Selling Stockholder
shall promptly furnish to each person (including each broker) to whom such
Selling Stockholder has delivered copies of the Prospectus an equivalent number
of copies of any amendment thereof or supplement thereto (provided that the
Company has provided such Selling Stockholder with such amendment or
supplement).
(d) Transaction Information. Each Stockholder shall
report promptly to the Company upon any disposition of Shares by such
Stockholder and upon completion of the distribution of such Selling
Stockholder's Shares pursuant to any Registration Statement.
(e) Exchange Act Compliance. Each Selling Stockholder
shall, at any time such Selling Stockholder is engaged in a distribution of the
Shares under any Registration Statement, comply to the extent required with
Rules 10b-5, 10b-6 and 10b-7 (as currently in effect or as amended or any
successor or similar provisions) promulgated under the Exchange Act and shall
distribute the Shares solely in the manner described in any Registration
Statement, and shall not do any of the following during the period from the
effective date of any Registration Statement
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until the completion of any offering of the Shares by such Selling Stockholder
pursuant to such Registration Statement:
(i) Bid for or purchase, for any account in which
such Selling Stockholder or any affiliate of such Selling Stockholder has a
beneficial interest, any securities of the Company other than in transactions
permitted by Rule 10b-6 under the Exchange Act;
(ii) Attempt to induce any person to purchase any
securities of the Company other than in transactions permitted by Rule 10b-6
under the Exchange Act; and
(iii) Pay or offer or agree to pay to anyone,
directly or indirectly, any compensation for soliciting another to purchase any
securities of the Company on a national securities exchange or pay or offer or
agree to pay to anyone any compensation for purchasing securities of the
Company on a national securities exchange other than those securities offered
by such Selling Stockholder.
(f) Publicity; Selling Efforts. Each Selling Stockholder
shall not, during the period of any offering by such Selling Stockholder of any
Shares under any Registration Statement, use or disseminate any information
concerning the Company other than the Prospectus (or any amendment thereof or
supplement thereto furnished by the Company) and may not undertake any form of
publicity with respect to the Company or engage in any similar activities that
may be deemed to be an unlawful selling effort within the meaning of Section 10
of the Exchange Act.
(g) Material Nonpublic Information. A Stockholder shall
not offer to sell, sell or otherwise enter into any transaction in connection
with any Shares if the Stockholder is aware of material nonpublic information
regarding the Company or its subsidiaries.
(h) Brokerage Commissions. Except as disclosed in the
Prospectus, a Selling Stockholder will not pay unusual or special brokerage
commissions (other than ordinary brokerage arrangements) on any sales effected
through a broker, and no selling arrangement will have been entered into
between a Selling Stockholder and any securities dealer or broker.
(i) Method of Disposition. In any distribution of Shares
pursuant to Rule 415, at least five business days prior to any disposition of
the Shares, the applicable Selling Stockholder shall advise the Company of the
dates on which such disposition is expected to commence and terminate, the
number of such Selling Stockholder's Shares expected to be sold, the method of
disposition and such other
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information as the Company may reasonably request in order to supplement the
Prospectus in accordance with the rules and regulations of the SEC.
11. Company Undertakings. The Company covenants with the
Stockholders as follows:
(a) Furnish Information. Before filing a Registration
Statement, a preliminary prospectus or a Prospectus, the Company will furnish
each Selling Stockholder copies of such documents. The Company also will
furnish to each Selling Stockholder such copies of each preliminary prospectus
and Prospectus as each Selling Stockholder may reasonably request. The Company
will furnish to each Selling Stockholder a copy of all documents filed with and
all correspondence from or to the SEC in connection with the offering covered
by any Registration Statement. Notwithstanding any of the obligations of the
Company set forth herein, the Company shall only be required to furnish such
audited annual or unaudited quarterly or monthly financial statements required
to keep the Registration Statement effective under the Securities Act.
(b) Material Developments. The Company will notify each
Selling Stockholder of the happening of any event as a result of which a
Prospectus being used by such Selling Stockholder to sell Shares pursuant to a
Registration Statement contains an untrue statement of a material fact or omits
to state any material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading. Following such notice and upon the Company's written
request, each Selling Stockholder shall deliver to the Company all copies
(other than permanent file copies then in any Stockholder's possession) of the
Prospectus that was in effect prior to such written notice. Subject to Section
12, the Company thereafter will use commercially reasonable efforts to prepare
promptly a supplement or amendment of such Prospectus so that, as thereafter
delivered to the purchaser of the Shares, the Prospectus will not contain an
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
(c) Underwriting Agreements. In any underwritten
distribution of Shares, the Company shall, to the extent required by the
managing underwriter of such distribution (i) enter into and perform the
Company's obligations under the applicable underwriting agreement, (ii) furnish
to the managing underwriter an opinion of counsel to the Company (which may be
the Company's in-house counsel) addressing customary legal issues reasonably
requested by the managing underwriter and (iii) furnish to the managing
underwriter a customary "comfort letter" addressed
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to the managing underwriter from the Company's independent certified public
accountants.
12. Blocking Periods. Each Selling Stockholder shall cease any
distribution of the Shares under any Registration Statement upon receipt of a
Blocking Notice (defined below) from the Company. The period of time during
which a Selling Stockholder shall cease distribution of the Shares (the
"Blocking Period") shall be the earlier of 60 days from the receipt of such
Blocking Notice by the Selling Stockholder or the date upon which such
transaction, proposed transaction or negotiations have been publicly disclosed
or terminated. The Company promptly shall send each Selling Stockholder
written notice (the "Blocking Termination Notice") at the earliest of such
times as (a) such transaction, proposed transaction or negotiations have been
publicly disclosed or terminated, (b) such non-public information has been
publicly disclosed, or (c) counsel to the Company has determined that such
disclosure is not required due to subsequent events. If any Blocking Period
occurs after the effective date of a Registration Statement, then the period
during which the Company is obligated to use commercially reasonable efforts to
keep such Registration Statement effective and from time to time to amend such
Registration Statement shall be extended by a number of days equal to the
length in days of the Blocking Period.
Any sale, offer to sell or other transaction involving Shares by any
Selling Stockholder during a Blocking Period shall constitute a material breach
by such Selling Stockholder of its obligations hereunder. Blocking Notices for
the reasons and for the periods of time set forth in this Section shall not
constitute a breach hereof by the Company.
The Company also may delay the filing of any Registration Statement,
Prospectus, amendment or supplement, or the effectiveness of any Registration
Statement, Prospectus, amendment or supplement, filed pursuant hereto upon
delivery of a Blocking Notice to the Selling Stockholders. The Company's delay
in filing or pursuing the effectiveness of a Registration Statement,
Prospectus, amendment or supplement during a Blocking Period shall not
constitute a breach hereof. At the conclusion of the Blocking Period, the
Company shall resume its efforts in connection with any such Registration
Statement, Prospectus, amendment or supplement and shall send a Blocking
Termination Notice to each Selling Stockholder.
"Blocking Notice" shall mean a written notice to the effect that (i) a
distribution of Shares or the filing or effectiveness of a Registration
Statement, Prospectus, amendment or supplement, at such time would require the
public disclosure of material nonpublic information concerning a transaction,
proposed transaction or negotiations involving the Company or any of its
affiliates that, in the Company's reasonable judgment, could materially
interfere with such transaction,
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proposed transaction or negotiations or (ii) such distribution of Shares or the
filing or effectiveness of a Registration Statement, Prospectus, amendment or
supplement at such time otherwise would require premature disclosure of
nonpublic information that, in the Company's reasonable judgment, could
adversely affect or otherwise be detrimental to the Company.
13. Piggyback Registration.
(a) Procedure. Subject to the terms and conditions set
forth herein, if the Company proposes at any time to register any shares of
Common Stock (the "Company Shares") under the Securities Act for sale for the
Company's account in a primary underwritten offering, the Company will promptly
(but in no event less than 15 days prior to the anticipated filing date of the
Company's registration statement (the "Piggyback Registration Statement")
pursuant to the Securities Act) give written notice (the "Piggyback Notice") to
the Stockholders of the Company's intention to effect such registration (such
notice to specify, to the extent known, the anticipated filing date, the number
of shares of Common Stock proposed to be registered and the general
distribution arrangements), and the Stockholders shall be entitled to include
in such Piggyback Registration Statement, as a part of such underwritten
offering, such number of Shares (the "Piggyback Shares") to be sold for the
account of Selling Stockholders (on the same terms and conditions as the
Company Shares) as shall be specified in written requests signed by the
applicable Stockholder and delivered to the Company not less than 10 days
before the later of (i) the anticipated filing date specified in the Piggyback
Notice or (ii) the actual filing date.
(b) Limitations. The Company's obligation to include
Piggyback Shares in a Piggyback Registration Statement is subject to each of
the following:
(i) Abandoned Registration. If, at any time
after giving the Piggyback Notice and prior to the effective date of the
Piggyback Registration Statement, the Company shall determine for any reason
not to register the Company Shares, then the Company may, at its election, give
written notice of such determination to the Selling Stockholders, and thereupon
the Company shall be relieved of its obligation to use any efforts to register
any Piggyback Shares in connection with such abandoned registration. The
Company's election not to register the Company Shares pursuant to this Section
shall not constitute a breach hereof.
(ii) Cutback. If, in the reasonable opinion of
the managing underwriter of such offering, the distribution of all or a
specified portion of the Piggyback Shares would materially interfere with the
registration and sale of the Company Shares, then the number of each Selling
Stockholder's Piggyback Shares, and the number of shares of Common Stock to be
registered on behalf of any person other than the Company ("Other Holders"), to
be included in the Piggyback
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Registration Statement shall be reduced (pro rata among all Selling
Stockholders and Other Holders on the basis of the number of shares that each
Selling Stockholder and each Other Holder requested be included) to such
number, if any, that can be included without such interference. If, as a
result of the cutback provisions of the preceding sentence, any Selling
Stockholder is not entitled to include all of his or its requested Shares in
such registration, then such Selling Stockholder may elect to withdraw his or
its request to include any or all of his or its Shares in such registration.
(c) Conditions to Inclusion. As a condition to each
Selling Stockholder's right to include Piggyback Shares in a registration
pursuant to this Section, such Selling Stockholder shall, if requested by the
Company or the managing underwriter in connection with such registration and
distribution (i) agree to sell such Selling Stockholder's Piggyback Shares on
the basis provided in any underwriting arrangements entered into in connection
therewith, (ii) complete and execute all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents that are required
under the terms of such underwriting arrangements and (iii) promptly provide
any Information requested, in writing, by the Company or the managing
underwriter.
(d) Continuing Rights of Stockholders. If a Stockholder
decides not to include all of its Shares in any Piggyback Registration
Statement filed by the Company pursuant to this Section 13, such Stockholder
shall nevertheless continue to have the right to include any Shares in any
subsequent Piggyback Registration Statement(s) as may be filed by the Company
with respect to offerings of shares of Common Stock, all upon the terms and
conditions set forth herein.
14. Indemnification; Contribution.
(a) Indemnification by Company. The Company shall
indemnify and hold harmless, to the extent permitted by law, each Selling
Stockholder, its officers and directors and each person, if any, who controls
such Selling Stockholder (within the meaning of the Securities Act) against all
losses, claims, damages, liabilities and expenses (including without limitation
reasonable attorneys' fees) insofar as such losses, claims, damages,
liabilities and expenses arise out of or are based on (i) any untrue or alleged
untrue statement of a material fact contained in any Registration Statement
under which Shares owned by such Selling Stockholder were registered under the
Securities Act, any Prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or any documents filed under state securities or
"Blue Sky" laws in connection therewith, (ii) any omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein (in the case of a Prospectus, in the light of the
circumstances under which they were made) not misleading or (iii) any
violations or
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alleged violation of the Securities Act, the Exchange Act, any applicable state
securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any applicable state securities law in connection with the
offering covered by such Registration Statement (items (i), (ii) and (iii) are
collectively referred to herein as "Violations"); and the Company will
reimburse each such Selling Stockholder, its officers and directors and each
person, if any, who controls such Selling Stockholder for reasonable legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided, however,
that the indemnity agreement contained in this Section 14(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Company, which
consent shall not be unreasonably withheld, nor shall the Company be liable in
any such case for any loss, claim, damage, liability or action to the extent
that it arises out of or is based on a Violation that occurs in reliance upon
and in conformity with written information furnished expressly for use in
connection with such registration by such Selling Stockholder, officer,
director, or controlling person of such Selling Stockholder. In connection
with an underwritten offering, the Company also will indemnify the
underwriter(s) thereof, their officers and directors and each person who
controls (within the meaning of the Securities Act) such underwriter(s) to the
same extent as provided above with respect to the indemnification of the
Selling Stockholders.
(b) Indemnification by Each Selling Stockholder. In
connection with any Registration Statement in which a Selling Stockholder is
participating, each such Selling Stockholder shall, severally and not jointly,
indemnify and hold harmless, to the extent permitted by law, the Company, the
Company's directors and officers and each person, if any, who controls (within
the meaning of the Securities Act) the Company against any losses, claims,
damages, liabilities and expenses (including without limitation reasonable
attorneys' fees) insofar as such losses, claims, damages, liabilities and
expenses arise out of or are based on a Violation which occurs in reliance upon
and in conformity with written information furnished expressly for use in
connection with such registration by such Selling Stockholder, officer,
director, or controlling person of such Selling Stockholder; and each such
Selling Stockholder will reimburse the Company, its officers and directors and
each person, if any, who controls the Company for reasonable legal or other
expenses reasonably incurred by the Company in connection with investigating or
defending any such loss, claim, damage, liability or action.
(c) Indemnification Procedures. Any person entitled to
indemnification hereunder shall give prompt written notice to the indemnifying
party after the receipt by such person of any written notice of the
commencement of any action, suit, proceeding or investigation or threat thereof
made in writing for which such person will claim indemnification or
contribution pursuant hereto and permit
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the indemnifying party to participate therein and, to the extent that it
desires, jointly with any other indemnifying party similarly situated, to
assume the defense of such claim with counsel reasonably satisfactory to such
indemnified party. If the indemnifying party elects to assume the defense of a
claim, it shall not be liable to such indemnified party for legal expenses
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation and except as otherwise
provided below; provided, however, that such indemnified party shall, at all
times, cooperate in the defense of the indemnified party. The indemnifying
party shall be liable to the indemnified party for legal or other expenses
incurred by the indemnified party even if the indemnifying party has offered to
assume the defense thereof if (i) the employment of counsel by the indemnified
party has been authorized in writing by the indemnifying party, (ii) the
indemnified party shall have reasonably concluded that there may be a conflict
of interest between the indemnified party and the indemnifying party in conduct
of the defense of such action or (iii) the indemnifying party shall not in fact
have employed counsel to assume the defense of such action. If the
indemnifying party is not entitled to, or elects not to, assume the defense of
a claim, then it will not be obligated to pay the fees and expenses of more
than one counsel with respect to such claim. The indemnifying party will not
be subject to any liability for any settlement made without its consent. If
the failure of any person to give prompt notice to the indemnifying party of
any claim with respect to which it seeks indemnification prejudices such
indemnifying party, such indemnifying party shall be relieved of its obligation
to indemnify such person to the extent that such indemnifying party has been
prejudiced; provided, however, that the indemnifying party shall not be so
relieved if the failure to give prompt notice to the indemnifying party was
beyond the control of the indemnified party. No indemnifying party will
consent to entry of any judgment or enter into any settlement agreement which
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
of such claim or litigation.
(d) Contribution. If the indemnification provided for in
this Section from the indemnifying party is unavailable to an indemnified party
hereunder in respect of any losses, claims, damages, liabilities or expenses
(including without limitation reasonable attorneys' fees) referred to therein,
then the indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses (including
without limitation reasonable attorneys' fees) in such proportion as is
appropriate to reflect not only the relative benefits received by the
indemnifying party on the one hand and the indemnified party on the other, but
also the relative fault of the indemnifying party and the indemnified party as
well as any other relevant equitable considerations. The relative fault of
such indemnifying party and indemnified parties shall be determined by
reference to, among other things, whether any action in question, including any
untrue or alleged untrue statements
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of a material fact or omission or alleged omission to state a material fact,
has been made by, or relates to information supplied by, such indemnifying
party or indemnified parties, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such action. The
amount paid or payable by a party as a result of the losses, claims, damages,
liabilities and expenses (including without limitation reasonable attorneys'
fees) referred to above shall be deemed to include, subject to the limitations
set forth in Section 7(c), any legal or other fees or expenses reasonably
incurred by such party in connection with any investigation or proceeding.
The parties hereto acknowledge that it would not be just and
equitable if contribution pursuant to this Section 7(d) were determined by pro
rata allocation or by any other method of allocation which does not take into
account the equitable considerations referred to in the immediately-preceding
paragraph. No person guilty of fraudulent misrepresentation (within the
meaning of Paragraph 11(f) of the Securities Act) shall be entitled to
contribution from any person who is not guilty of such fraudulent
misrepresentation.
15. Expenses. The Company shall bear all Registration Expenses;
provided, however, that the Company shall have no obligation to pay or
otherwise bear the Selling Expenses of any Stockholder.
16. Termination. This Agreement and the obligations of the
Company hereunder shall terminate on the earliest of (a) the first date on
which no shares of Common Stock held by any Stockholder constitute Shares
hereunder, (b) the date on which each party hereto agrees in writing to such
termination and (c) the fourth anniversary of the Closing Date; provided,
however, solely with respect to item (c) of this Section, such termination date
shall be extended in the event any Demand Registration is postponed pursuant to
the provisions of Section 4 hereof for a time period equal to the period of
such delay or postponement.
17. Rule 144 Reporting. With a view to making available to the
Stockholders the benefits of certain rules and regulations of the SEC that may
permit the sale of the Shares to the public without registration, the Company
agrees to use commercially reasonable efforts during the term of this Agreement
to (a) make and keep public information available, as those terms are
understood and defined in Rule 144, (b) file with the SEC, in a timely manner,
all reports and other documents required of the Company under the Exchange Act
and (c) so long as any Stockholder owns any Shares, furnish to such Stockholder
upon written request a written statement by the Company as to the Company's
compliance with the reporting requirements of Rule 144, a copy of the most
recent annual or quarterly report of the Company and such other reports,
documents and information as a Stockholder may
17
<PAGE> 18
reasonably request in availing himself or itself of any rule or regulation of
the SEC allowing it to sell any such securities without registration.
18. Miscellaneous.
(a) Successors and Assigns. The registration rights
provided hereunder are not transferable and shall not inure to the benefit of
any persons other than the respective Stockholders; provided, however, each
Stockholder may transfer such Stockholder's registration rights hereunder to a
charitable remainder trust as defined in Section 664 of the Internal Revenue
Code, the Treasury Regulations promulgated thereunder, and the revenue
procedures and revenue rulings relating thereto; provided, further, that CLC IO
may assign its rights hereunder to any of the Stockholders to whom CLC IO's
Shares are transferred, whether by dividend or otherwise. Any such permitted
transferee shall succeed to a Stockholder's registration rights hereunder only
if the permitted transferee agrees in writing to perform all the obligations of
a Stockholder hereunder. Thereafter, all references herein to a "Stockholder"
or "Stockholders" shall be deemed to include such permitted transferee. Any
transfer or assignment in contravention of this Section shall be null and void.
(b) Entire Agreement; Amendment. This Agreement and the
other documents delivered pursuant hereto and referenced herein constitute the
full and entire understanding and agreement between the parties and supersede
any other agreement, written or oral, with regard to the subject matter hereof.
Except as expressly provided herein, neither this Agreement nor any term hereof
may be amended, waived, discharged or terminated, except by a written
instrument signed by the parties hereto.
(c) Notices, Etc. All notices and other communications
required or permitted hereunder shall be in writing and shall be mailed by
certified or registered mail, postage prepaid with return receipt requested,
telecopy (with hardcopy delivered by overnight courier service), or delivered
by hand, messenger or overnight courier service, and shall be deemed given when
received at the addresses of the parties set forth below, or at such other
address furnished in writing to the other parties hereto.
If to the Company: AMRESCO, INC.
Suite 2400
700 North Pearl Street
Dallas, TX 75201
Attention: General Counsel
(214) 953-7757 (fax)
18
<PAGE> 19
with a copy to: Haynes and Boone, LLP
Suite 3100
901 Main Street
Dallas, Texas 75202
Attention: Tom D. Harris
(214) 651-5940 (fax)
If to the Stockholders: 565 W. Myrtle, Suite 410
Boise, Idaho 83702
Attention: (Applicable Stockholder)
(208) 333-2050 (fax)
with a copy to: Hawley Troxell Ennis & Hawley
First Interstate Center
877 Main Street, Suite 1000
P.O. Box 1617
Boise, Idaho 83701
Attention: Paul Boyd
(208) 342-3829 (fax)
(d) No Third Party Beneficiary, Etc. There shall be no
third party beneficiary hereof. Neither the availability of, nor any limit on,
any remedy hereunder shall limit the remedies of any party hereto against third
parties.
(e) Reformation; Severability. In case any provision
hereof shall be invalid, illegal or unenforceable, such provision shall be
reformed to best effectuate the intent of the parties and permit enforcement
thereof, and the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby. If such
provision is not capable of reformation, it shall be severed from this
agreement and enforceability of the remaining provisions shall not in any way
be affected or impaired thereby
(f) Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original, but all of which
together shall constitute one and the same instrument. Any counterpart may be
delivered by facsimile; provided, however, that attachment thereof shall
constitute the representation and warranty of the person delivering such
signature that such person has full power and authority to attach such
signature and to deliver this Agreement. Any facsimile signature shall be
replaced with an original signature as promptly as practicable.
(g) Titles and Subtitles. The titles of the paragraphs
and subparagraphs hereof are for convenience of reference only and are not to
be
19
<PAGE> 20
considered in construing this Agreement. References to "Sections" herein are
references to sections of this Agreement. The words "herein," "hereof,"
"hereto" and "hereunder" and other words of similar import refer to this
Agreement as a whole and not to any particular Article, Section or other
subdivision.
(h) Governing Law; Attorneys' Fees. This Agreement shall
be governed by, construed, interpreted and applied in accordance with the laws
of the State of Texas, without giving effect to any conflict of laws rules that
would refer the matter to the laws of another jurisdiction.
Each party hereto hereby irrevocably submits to the exclusive
jurisdiction of the United States District Court for the Northern District of
Texas and, if such court does not have jurisdiction, of the courts of the State
of Texas in Dallas County, for the purposes of any action arising out of this
Agreement, or the subject matter hereof, brought by any other party.
To the extent permitted by applicable law, each Stockholder
hereby waives and agrees not to assert, by way of motion, as a defense or
otherwise in any such action, any claim (i) that it is not subject to the
jurisdiction of the above-named courts, (ii) that the action is brought in an
inconvenient forum, (iii) that it is immune from any legal process with respect
to itself or its property, (iv) that the venue of the suit, action or
proceeding is improper or (v) that this Agreement, or the subject matter
hereof, may not be enforced in or by such courts.
The prevailing party in any action or proceeding relating to this
Agreement shall be entitled to recover reasonable attorneys' fees and other
costs from the non-prevailing parties, in addition to any other relief to which
such prevailing party may be entitled.
* * * * *
20
<PAGE> 21
This Agreement has been executed and delivered as of the date first
written above.
The Company:
AMRESCO, INC.
By:
-------------------------------------
Printed Name:
---------------------------
Title:
----------------------------------
The Stockholders:
----------------------------------------
Lowell Fulkerson
----------------------------------------
Todd Lindsey
----------------------------------------
Matthew Moore
----------------------------------------
John Prehn
----------------------------------------
Peter Wachtell
CLC IO, INC.
By:
-------------------------------------
Printed Name:
---------------------------
Title:
----------------------------------
21
<PAGE> 1
EXHIBIT 5.1
April 16, 1997
AMRESCO, INC.
700 North Pearl Street
Suite 2400, LB 342
Dallas, Texas 75201-7424
Re: Registration on Form S-3 of 1,590,947 shares of Common Stock,
par value $0.05 per share, of AMRESCO, INC.
Gentlemen:
I am general counsel of AMRESCO, INC., a Delaware corporation (the
"Company"), in connection with the registration and sale of up to 1,590,947
shares of Common Stock, par value $0.05 per share, of the Company (the
"Shares") to be sold by certain Selling Stockholders (the "Selling
Shareholders").
I have examined such documents, records and matters of law as I have
deemed necessary for purposes of this opinion. Based on the foregoing, I am of
the opinion that the Selling Stockholders' Shares are duly authorized, validly
issued, fully paid and nonassessable.
In rendering the foregoing opinion, I have relied as to certain
factual matters upon certificates of officers of the Company, the Selling
Stockholders and public officials, and I have not independently checked or
verified the accuracy of the statements contained therein.
I hereby consent to the filing of this opinion as Exhibit 5.1 to the
Company's Registration Statement on Form S-3 relating to the Shares and any
amendments thereto filed by the Company to effect registration of the Shares
under the Securities Act of 1933, as amended, and to the reference to me under
the caption "Legal Matters" in the Prospectus constituting a part of such
Registration Statement.
Very truly yours,
/s/ L. Keith Blackwell
L. Keith Blackwell
Vice President, General Counsel and
Secretary
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
AMRESCO, INC. on Form S-3 of our report dated February 7, 1997, appearing in
the Annual report on form 10-K of AMRESCO, INC. for the year ended December 31,
1996 and to the reference to us under the heading "Experts" in the Prospectus,
which is part of this Registration Statement.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Dallas, Texas
April 16, 1997
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the Incorporation by reference in this registration statement on
Form S-3 of our report dated December 19, 1996, on our audits of the financial
statements of Quality Mortgage USA, Inc. We also consent to the reference to
our firm under the caption "Experts."
/s/ Coopers & Lybrand L.L.P
COOPERS & LYBRAND L.L.P.
Newport Beach, California
April 7, 1997
<PAGE> 1
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitute and appoints each of Robert H. Lutz, Jr., Robert L.
Adair III and L. Keith Blackwell, his true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, acting along, to sign,
execute and file with the Securities and Exchange Commission and any state
securities regulatory board or commission any documents relating to the
proposed issuance and registration of the securities offered pursuant to the
Registration Statement of AMRESCO, INC. on Form S-3 under the Securities Act of
1933, including any amendment or amendments relating thereto, with all exhibits
and any and all documents required to be filed with respect thereto with any
regulatory authority, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises in order to
effectuate the same as fully to all intents and purposes as he might or could
do if personally present, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ ROBERT H. LUTZ, JR. Chairman of the Board and Chief March 31, 1997
-------------------------------------------------- Executive Officer
Robert H. Lutz, Jr.
/s/ ROBERT L. ADAIR III Director, President and Chief March 31, 1997
-------------------------------------------------- Operating Officer
Robert L. Adair III
/s/ BARRY L. EDWARDS Executive Vice President and Chief March 31, 1997
-------------------------------------------------- Financial Officer (Principal Financial
Barry L. Edwards Officer)
/s/ JAMES P. COTTON, JR. Director March 31, 1997
--------------------------------------------------
James P. Cotton, Jr.
/s/ RICHARD L. CRAVEY Director March 31, 1997
--------------------------------------------------
Richard L. Cravey
/s/ GERALD E. EICKHOFF Director March 31, 1997
--------------------------------------------------
Gerald E. Eickhoff
/s/ AMY J. JORGENSEN Director March 31, 1997
--------------------------------------------------
Amy J. Jorgensen
/s/ JOHN J. MCDONOUGH Director March 31, 1997
--------------------------------------------------
John J. McDonough
/s/ BRUCE W. SCHNITZER Director March 31, 1997
--------------------------------------------------
Bruce W. Schnitzer
/s/ EDWIN A. WAHLEN, JR. Director March 31, 1997
--------------------------------------------------
Edwin A. Wahlen, Jr.
/s/ RONALD B. KIRKLAND Vice President and Chief Accounting March 31, 1997
-------------------------------------------------- Officer (Principal Accounting Officer)
Ronald B. Kirkland
</TABLE>
